The Interest Rate on the 10 Year US Note, ^TNX, traded lower to 2.65%. Aggregate Credit, AGG, led by Junk Bonds, JNK, rose, giving impetus to the Interest Rate Sensitive Sectors, Electric Utilities, XLU, Mortgage REITS, REM, and Energy Partnerships, AMJ, to lead the Big Nine, seen in this Finviz Screener, and US Stocks, VTI, and World Stocks, VT, higher. Europe, VGK, and the European Financials, EUFN, rose strongly reflecting overnight trading.

Yield bearing sectors trading higher included AUSE, BRAF, EUFN, and RWW, the latter to a new high, which gave impetus to the Russell 2000, IWM, and the Russell 2000 Growth, IWO, to swell to new highs.

Stocks rose on the Briefing.com report “According to the Federal Reserve, consumer credit increased by $19.6 billion in May. This followed the prior month’s increase of $10.9 billion, and was higher than the $13.2 billion that had been broadly expected among economists polled by Briefing.com”. Sectors trading higher included PSCE, XRT, PPA, IHF, RZV, FDN, PBS, IAI, FPX, PJP, PJB, RXI, IYC, VCR, IGV, IBB, and KRE, all to new rally highs. The Washinton Post Blogs relates. “Anyone who lived through the financial crisis and recession, in which excessive household debt was a major contributing factor, has to feel a little squeamish about how quickly consumer credit is rising”

Briefing.com reports the largest tech component, Apple, AAPL, shed 0.6% amid reports suggesting the company is reducing its smartphone production. Major Apple suppliers also registered losses as Broadcom, BRCM, and Qualcomm, CCOM, both fell near 1.4%.

Gold, GLD, Silver, SLV, and Base Metals, DBB. rose. Butt heir mining companions did not. It was a most excellent day to invest in Gold Miners, GDX, such as ABX, ANV, NEM, KCG, and RGLD, as is suggesgted in their bottomin gout seen in ongoing Yahoo Finance Chart and in as much as the Gold Mining Stocks have reached a bottom of seigniorage relative to the US Ten Year Government Note, GDX:TLT.

Robert Stevens of WSWS writes Greece is billions of euros behind in funds it agreed to hand over to its creditors through a troika agreed privatisation programme. After failing to find a buyer for its natural gas company DEPA, due to Russian firm Gazprom pulling out, and ongoing problems with the €700 million sale of the OPAP state gaming monopoly, the government reportedly asked the troika to reduce its privatisation target of €2.6 billion this year. DEPA and OPAP were selected as the two flagship privatisations, with their revenues expected to raise half of the €2.6 billion. Privatisation income has not even reached €1 billion this year and the target has already been revised downwards twice. A June review by the IMF warned that due to the “slippage” in the privatisation programme, a deep hole would appear in the government’s budget and “additional financing will need to be identified.”

The three news reports presented below, illustrate that Eurozone leaders are only kicking “the can” that is the “Greek fiscal budget crisis” down the road. Greece is an insolvent nation and thus a failed sovereign nation state that relies upon seigniorage aid for its fiscal spending. Greek socialism is the most extreme form of all socialism as its constitution forbids firing of any state workers; and there are very few private workers in Greece because of massive anticompetitive rules in place. The economy of Greece is the definition of clientelism, which the Economist Magazine described as pork and patronage. In all of the Greek Bailouts, that is in I, II, and III, Greece promised to annul its constitution and dismiss employees from the right to lifetime jobs; but this has not happened. The only reform presented currently is one of administrative leave and possible dismissal, which is coming up for likely Parliament approval, which is being met with a general strike set for next week, the WSJ reports.

The government has also “committed to take steps to bring public administration reforms back on track,” including pushing through plans to reduce the number of civil servants, one of the required measures that has been among the most contentious, and delayed, in Greece’s reform program.

The government must put 12,500 civil servants on administrative leave by the end of 2013, with the possibility of dismissal. Those targeted include 2,200 school security personnel, 3,500 members of the Athens municipal police, which will be disbanded and most of its members absorbed into Greece’s police force, at least 2,000 local government employees, 1,500 teachers and several employees of various ministries. They will be paid 75 percent of their normal salary and if they aren’t transferred to other state agencies within eight months of being put on leave, they will be subject to dismissal.

The WSJ writes, The coming Greek write off: The EU will never get its money back. Greece’s debt-to-GDP ratio stood at 157% of GDP at the end of last year, even after a restructuring that drastically reduced the value of its privately held sovereign debt. The budget deficit in 2012 was 10% of GDP. And that’s on top of a 26.8% jobless rate, five years of shrinking GDP, and further anticipated shrinking of 4.4% this year.

All this underscores what is slowly becoming clear even in Brussels and Frankfurt: Greece will never repay the money it’s been lent to “save” it. The current debate over whether Greece has done enough by way of reform, tax hikes and spending cuts to have earned the next tranche of bailout funds is largely beside the point. Greece’s external debt position is far worse than when the bailouts began, when its debt stood at a mere 129% of GDP. Any talk of debt sustainability in Greece has become a joke.

Not only in Greece, but in every one of the Eurozone’s periphery states, treasury debt is unsustainable. With the meteoric rise in the Interest Rate on the US 10 Year Government Note, ^TNX, beginning in May 2013, the PIGS Treasury Rate has been skyrocketing, resulting in a boiling over credit crisis.

And it is not only the PIGS Treasury Debt that is undermining democracy in Europe, it is leadership instability and soaring unit labour costs in Italy which rose by 35 percentage points between 2000 and 2012. In Germany, the equivalent figure was three percentage points. Over the same period, Italian labour productivity gains were 14 points lower than Germany’s. No wonder Italian industrial production is collapsing, to Germany’s benefit writes the Globe and Mail. “It’s currently very trendy in Italy to blame Angela Merkel, Mario Monti, the euro and austerity measures for the current recession. … [But its persistence] is the legacy of more than a decade of a lack of reforms in credit, product and labour markets, which suffocated innovation and productivity growth and resulted in wage dynamics that were completely decoupled from labour productivity.”

There is waiting in the stage of Europe’s wings, the most capable of sovereigns. Soon, Jesus Christ as presented in Ephesians 1:1-23, will open the curtains, and into the limelight will step the Sovereign, the Eurozone’s Leader as foretold in Revelation 13:5-10. He will be accompanied by the Seignior, the EU’s Finance and Economic Minister, Revelation 13:11-18. Out of Eurozone sovereign insolvency and banking insolvency, the word, will, and way of these two will provide the way forward as public private partnerships form to manage the economy of a Eurozone Super State. While Italians and Greeks cannot be Germans, all will be one, living in a regional gulag of debt servitude and totalitarian collectivism. According to bible prophecy of Daniel 2:25-45 and Revelation 13:1-4, Regionalism will replace European Socialism and Greek Socialism as the engine of economic and political life.

Candidates for the Sovereign include Guido Westerwelle; and candidates for the Seignior include Jens Weidmann and Mario Draghi.

Liberalism’s Banker regime (which was based upon democratic nation states) had a policy of investment choice. The dynamo was one monetary interventionism, consisting of POMO, Quantitative Easing, Central Bank Interest Rate Reductions, Kuroda Abenomics, and Global ZIRP, which powered up corporate profit and global growth … and came with credit schemes, such as free trade agreements, financial deregulation, leveraged buyouts, nation investment, currency carry trade investing, securitization of debt, dollarization, and financialization of stocks and ETFs, such as corporate bonds which convert into stocks … where Milton Friedman’s Free To Choose concept of floating currencies and abandonment of the gold standard, established the rule underlying all investing, providing for the fiat money system.

Authoritarianism’s Beast regime (is based upon statist regional governance) has a policy of diktat. The dynamo is one totalitarian collectivism consisting of public private partnerships for oversight of the factors of production, banking, commerce and trade, which powers up regional security, stability and sustainability … and comes with debt servitude schemes, such as regional framework agreements, bank deposits bailins, new taxes, privatizations, capital controls, central bank rulings for capital adequacy consisting of national treasuries, and austerity measures … where Nannycrats establish the rule underlying all diktat, providing for the diktat money system.

Benson te writes US Stock Markets: The incompatibility of rising stocks and rising bond yields. The lessons of history are that rising yields have largely been incompatible with sustained stock market booms. Both may concomitantly rise but the eventual outcome has been a bear market cycle (2007-2008, dotcom bubble), stock market crash (1987) or a quasi-bear markets (1983-1984 or 1981-1982).

The relationship has hardly been statistical but causal—rising rates eventually prick unsustainable debt financed bubbles.

Yet a stock market boom can be engineered by governments that could destroy historical precedents. Venezuela should be an example. Venezuela’s stock market has been up a stratospheric 160% year to date. This translates to star bound 460% in one and a half years. But Venezuela’s deceiving outperformance comes at a heavy toll: the collapse of her currency the Bolivar which means rising stocks are symptoms of hyperinflation.

Again rioting bond markets as expressed through rising yields (which are indicative of higher policy rates) seems like the proverbial ‘sword of Damocles’[16] which hangs over the heads of the stock markets.

Differently put, unless bond markets stabilize, rising stock markets in the US or elsewhere, looks like an accident waiting to happen. I call rising stock markets, in the face of mounting systemic leverage and rising yields as the Wile E. Coyote moment. When stock markets become objects of rampant and excessive speculation fueled by bubble policies, and whose boom has been financed by leverage, stock markets undergo or endure boom-bust cycles.

1B) Tuesday July 9, 2013

The Interest Rate on the US Ten Year Note, ^TNX, traded lower to 2.63%; Aggregate Credit traded unchanged.

It was a bullish day as XTN, and XLI and PSCI, as well as Global Industrial Producers, FXR, traded strongly higher. Other sectors trading strongly higher included ITB, PKB, IEZ, OIH, and RZV. Story stocks trading included Cerner, CERN, Micron, MU, Intuitive Surgical, ISRG, LabCorp, LH, traded sharply lower. Yield bearing sectors trading higher include DRW, IYR, FNIO, and REZ, as well as DBU and XLU.

The Russell 2000, IWM, led World Stocks, VT, US Stocks, VTI, higher, as wll as the Too BigTo Fail Banks. RWW, Stockbrodkers, IAI, and RegionalBanks, KRE, higher. Bespoke investment Blog reports that the chart of the S&P 500, SPX, shows a rise to strong resistance at 1,654; this is seen in also its ETF, SPY.

Commodigties, DBC, traded higher, on higher Oil, USO, Gold, GLD, Silver, SLV, and Agricultural Collodities, RJA. The correction in the price of gold is over as the chart of Spot Gold, $GOLD, shows a 0.9% rise to strong resistance 1245; this as the chart of the US Dollar, $USD, shows a 0.5% rise to a frim close at $84.85.

Tyler Durden of Zero Hedge posts Presenting China’s first too big to fail “lack of liquidity” casualty. China’s biggest private shipbuilder, China Rongsheng Heavy Industries Group, last week filed for a profit warning as it expects a loss in the first half of 2013. That was the good news. The bad news is that Rongsheng appealed for government aid last Friday and said it was cutting staff as it was delaying payments to suppliers to deal with tightened cash flows. It also called on its shareholders for financial help and said it was in talks with banks and other financial institutions to renew existing credit lines. In other words a complete liquidity collapse.

Tyler Durden of Zero Hedge writes The Washington Examiner reports The second largest employer in America is Kelly Services – a temporary work provider. The company, started in 1946, serves 99% of the Fortune 100 and had revenues of $5.5bn in 2012. As The Examiner concludes Echoing our and Mr. Stockman’s previous thoughts, it’s a sad state of affairs for our country that the recovery, or lack thereof, is being fueled by a shift from full-time to part-time work

The collapse of the money system began with the jump on the Interest Rate on the US Ten Year Note, ^TNX, to 2.01% on May 24, 2013, which constituted an “extinction event”, that is a cataclysm, which literally destroyed the investment choice offered by bankers as the way of life, and terminated the paradigm of Liberalism.

The fiat money system has died, as evidenced by Major World Currencies, DBV, and Emerging Market Currencies, CEW, trading lower, and the US Dollar, $USD, UUP, rising strongly higher.

The credit system has collapsed, as evidenced by Aggregate Credit, AGG, falling sharply lower.

The diktat money system is rising to replace the fiat money system. And debt servitude is rising to replace credit.

There will be no debt jubilee, as under Authoritarianism, the debts of Liberalism will be applied to every man, woman, and child on planet earth, as the Banker Regime, is replaced by the Beast Regime of Revelation 13:1-4, and by its leader The Sovereign, Revelation 13:5-10, and by its Prophet, the Seignior, Revelation 13:11-18.

The emerging market policymakers tapping of foreign currency reserves as a means of stopping the bond vigilantes attack on their Treasury Debt, BWX, and EMB, can only last so long.

Jesus Christ is operating at the helm of the Economy of God, Ephesians 1:10, and has pivoting the world into the paradigm of Authoritarianism, where the diktat of nannycrats is the now the way of life.

Fiat money died, and diktat money has been coming to life.

The “extinction event” of the rise in the Interest Rate on the US Ten Year Note, ^TNX, terminated all of the authority of Liberalism’s policies and schemes, thereby ending Liberalism’s life experience.

Now, Authoritarianism’s policies and schemes, have authority, and ever increasing power, providing monetary and political life experience.

Yes, new policies and new schemes for the new age of Authoritarianism: policies of diktat and schemes of debt servitude schemes, such as, regional framework agreements, bank deposits bailins, privatizations, capital controls, new taxes and austerity measures.

1C) Wednesday July 10, 2013

Zero Hedge reports Monoderailed: Spain’s train station to nowhere. Tyler Durden writes From exaggerated passenger traffic expectations 40% higher than the current slower route’s traffic to the massive billion-euro debts that have already been accumulated, nothing says epic fail like the City of Villena’s 4,500 square meter gleaming new train station – the only access to thisb building in the middle of nowhere is a dirt track used by local farmers. The reason, simple: while the central government financed the building, the local Valencia regional government was responsible for funding the connection to the local city and freeways – it ran out of money, leaving the station high-and-dry. As Reuters adds Spain’s obsession with high-speed trains runs into budget reality. The disconnect says a lot about both Spain and its current finances, about a love affair with grand projects to showcase its modernity and a diminishing ability to pay for them.

The WSJ reports European Commission seeks sole authority to wind down banks. The European Commission will propose itself as the single authority for winding down banks in the euro zone, a step that will set the European Union’s executive on a collision course with the bloc’s most powerful member, Germany.

Berlin insists that such an authority, whose actions could force national governments to spend money to help rescue failed banks, would breach EU treaties. That, it says, could lead to legal challenges over bank restructurings and create uncertainty for financial markets at a sensitive time.

Michel Barnier, the EU commissioner responsible for financial-market regulation, was to lay out his final proposal Wednesday for a so-called single resolution mechanism, giving it the authority to restructure or close any of the 6,000 banks in the 17-nation euro zone that hit financial problems.

Bank restructurings currently take place under a patchwork of national rules, which also hinder the winding down of cross-border banks.The euro-zone’s ambitious banking union project, cornerstone of efforts to end the three-year-old debt crisis, aims to break the vicious link between struggling euro-zone banks and their governments.

The WSJ reports Plan reins in biggest banks. Proposal Requiring Extra Capital Would Force Firms to Be More Conservative or Shrink. U.S. regulators took their first big swing at addressing fears that Wall Street’s largest firms remain too risky five years after the financial crisis, unveiling plans to require them to set aside far more capital as protection against future disaster. The Federal Reserve, Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. are effectively trying to force big banks to become more conservative or to shrink. The first step, proposed Tuesday, would require banks to double the amount of capital they hold as protection against every loan, investment, building, security and other asset on their books, not just the risky ones.

At day’s end Reuters reports About half of the Federal Reserve’s policymakers felt the U.S. central bank’s bond-buying stimulus should be brought to a halt by year end when they met in June, but many wanted reassurance the U.S. jobs recovery was on solid ground before any policy retreat. In the end, most of the U.S. central bank’s 19 policymakers felt it was a good idea to have Fed Chairman Ben Bernanke lay out a road map at a post-meeting news conference on how they likely would wind down the so-called quantitative easing program, minutes from the meeting released on Wednesday showed.

An inquiring mind asks, will investors continue to trust in Ben Bernanke’s and the US Federal Reserve’s liberal monetary policies and credit schemes which have stimulated corporte growth and trade, achieved investment gain, democratic rule, and a moral hazard based prosperity?

Breakout reports worried analysts have cut their earnings growth expectations for the S&P 500 by a stunning 83%. As FactSet earnings analyst John Butters explains in the attached video, the expectations for profits has been lowered to just 0.7%, down from 4.2% on April 1, 2013, and Peak Prosperity relate Global slowdown.

The words trust and credit are used interchangeably. Could it be that out of further failure of Credit, AGG, as well as the World Major Currencies, DBV, and Emerging Market Currencies, CEW, that people will come to trust in regional nannycrats, and authoritarian policies of diktat and schemes of debt servitude, such as, regional framework agreements, bank deposits bailins, privatizations, capital controls, new taxes and austerity measures, which establish regional governance and totalitarian collectivism as life experience?

Ambrose Evans Pritchard of the Telegraph relates The wheels are coming off the whole of southern Europe. Europe’s debt-crisis strategy is near collapse. The long-awaited recovery has failed to take wing. Debt ratios across southern Europe are rising at an accelerating pace. Political consent for extreme austerity is breaking down in almost every EMU crisis state. And now the US Federal Reserve has inflicted a full-blown credit shock for good measure.

None of Euroland’s key actors seems willing to admit that the current strategy is untenable. They hope to paper over the cracks until the German elections in September, as if that is going to make any difference. A leaked report from the European Commission confirms that Greece will miss its austerity targets yet again by a wide margin. It alleges that Greece lacks the “willingness and capacity” to collect taxes. In fact, Athens is missing targets because the economy is still in freefall and that is because of austerity overkill.

(I comment that the economy is in free fall because it is amongst the most anticompetitive in the world, it is defined by clientelism, that is what the Economist Magazine says is pork and patronage, has oligarchs who live outside of the nation and contribute nothing to business in the country, and by a culture of tax non payment)

The Greek think-tank IOBE expects GDP to fall 5pc this year. It has told journalists privately that the final figure may be -7pc. The Greek stabilisation is a mirage. Italy’s slow crisis is again flaring up. Its debt trajectory has punched through the danger line over the past two years. The country’s €2.1 trillion (£1.8 trillion) debt – 129pc of GDP – may already be beyond the point of no return for a country without its own currency.

Standard & Poor’s did not say this outright when it downgraded the country to near-junk BBB on Tuesday. But if you read between the lines, it is close to saying the game is up for Italy.

Spain’s crisis has a new twist. The ruling Partido Popular is caught in a slush-fund scandal of such gravity that it cannot plausibly brazen out the allegations any longer, let alone rally the nation behind another year of scorched-earth cuts. El Mundo says a “pre-revolutionary” mood is taking hold.

A magistrate has obtained the original “smoking gun” alleging that Premier Mariano Rajoy accepted illegal payments as a minister. The Left is calling for his head but so are members of the Consejo General del Poder Judicial, the justice watchdog.

“Citizens cannot tolerate a situation where the prime minister has received undeclared payments,” said José Manuel Gómez, a Consejo member. Much of the ruling party appears tainted by a network of covert funding. If proved, said Mr Gomez, it poses a “very grave” threat to Spanish democracy.

What is new is that Vitor Gaspar, the high priest of Portugal’s shock therapy, has thrown in the towel. He blames the fainthearted for refusing to slash with greater vigour. Needless to say, he still refuses to accept that a strategy of wage cuts and deflation in a country with total debt of 370pc of GDP was always likely to fail. If Portugal does pull off an “internal devaluation” within EMU it will shrink the economic base. Yet the debt burden remains. This is the dreaded denominator effect. Public debt has jumped from 93pc to 123pc since 2010 alone. The Gaspar exit has closed a chapter. The junior coalition partners are demanding a change of course. I write before knowing whether President Anibal Cavaco Silva will call a snap election, opening the way for a Left-leaning anti-austerity government.

The Portuguese press is already reporting that the European Commission is working secretly on a second bail-out, an admission that the wheels are coming off the original €78bn EU-IMF troika rescue.

This is a political minefield. Any fresh rescue would require a vote in the German Bundestag, certain to demand ferocious conditions if this occurs before the elections.

Europe’s leaders have given a solemn pledge that they will never repeat the error made in Greece of forcing an EMU state into default, with haircuts for banks and pension funds. If Portugal needs debt relief, these leaders will face an ugly choice.

Do they violate this pledge, and shatter market confidence? Or do they admit for the first time that taxpayers will have to foot the bill for holding EMU together? All rescue packages have been loans so far. German, Dutch, Finnish and other creditor parliaments have never yet had to crystallize a single euro in losses.

(I comment that the closest friend of Christ, the Apostle John, was exiled to the Isle of Patmos, and while in his 90s, was given a dream by angels in Revelation 13:1-4, which foretold of the times in which we live, where a Beast Regime would arise out of Mediterranean Sea waves of turmoil to govern in the world’s ten regions and rule in all of mankind’s seven institutions, replacing all nation state rule and economic experience.)

The chart of the Dollar’s 200% ETF, UUP, manifested in the middle of a broadening top pattern, of which Street Authority relates, “when you see the broadening top, the market will eventually drop”; in this case meaning, that all currencies, including the US Dollar, will collapse into the Pit of Financial Abandon. The Interest Rate on the US Ten Year Note, ^TNX, traded lower to 2.57%.

The power of this week’s rally is seen in the chart of World Stocks, VT, in relation to Aggregate Credit, AGG, that is VT:AGG, rallying to its highest ever value, suggests that Peak Stock Wealth, VT, was achieved today July 11, 2013, as investors used margin credit to take stocks to their likely peak achievement, on the leverage of the world central banks’ monetary policies of investment choice, and schemes of credit expansion, such as quantitative easing. CBS Money Watch reports the investors enthusiam relating Stocks hit new high after Bernanke speech buoys investors

In as much as sovereignty begets seigniorage, that is moneyness, this week’s surge of seigniorage likely marks Liberalism peak sovereignty: World Stocks, VT, are at full leverage over Aggegate Credit, AGG, as is seen in VT:AGG. And Nation Investment, EFA, is at full leverage over World Treasury Bonds, BWX, as is seen in EFA:BWX. The Milton Friedman, Free To Choose, Floating Currency, Banker Regime of democratic nation states has achieved its zenith in terms of political, economic and monetary power.

It is Jesus Christ, working in the economic and political administrative plan of God, Ephesians 1:10, who has produced Liberalism’s greatest, that is most complete, economic and political experience. Through “extinction protocol”, He released the Four Horsemen of the Apocalypse beginning in May of 2010 with Greek Bailout I. As presented in bible prophecy of Revelation 6:1-8, the Rider on the White Horse, who has a bow without any arrows, is transferring the baton of sovereignty, from democratic nation states to regional nannycrats, with a goal of terminating democracy throughout the world, first in Greece, with the provision of Three Greek Bailouts, second, in Cyprus with a Bailin of Cyprus bank depositors, and third in Egypt with a military coup.

When the Bretton Woods system, synonymous with the Milton Friedman Free To Choose floating currency system, really gives way, America’s Dollar Empire, that is the US Dollar Hegemonic Empire, and its globe-spanning archipelago of mililtary bases, will collapse, and the Ten Toed Kingdom of Regional Governance of Daniel 2:25-45, will emerge, where ten regional zones of increasing iron diktat will emerge out of today’s clay democracy.

As the Interest Rate on the US Ten Year Note, ^TNX, rises, and as the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, steepens, seen in the Steepner ETF, STPP, steepening, then both the Too Big To Fail Banks, RWW, and the Regional Banks, KRE, will be be integrated into the Government and be known as “Government Banks” or “Gov Banks” for short. The banks will be part and parcel of government; their purpose will not be lending as it has been known, but rather check cashing, monetary control, and provisioning of diktat by statist public private partnerships, where regional nannycrats exericse oversight of the factors of production, commerce and trade.

The “extinction event” of debt deflation, that is destruction of credit via competitive currency devaluation, coming at the hands of the bond vigilantes calling the Interest Rate on the US Treasury Note, ^TNX, higher to 2.01% on May 24, 2013, as well as currency traders successfully selling currencies short, produced Peak Credit, AGG, and Peak Money, that is Peak World Major Currencies, DBV, and Peak Emerging Market Currencies, CEW, in May 2013.

Jesse Columbo presented The Bubble Bubble article Visualizing the Emerging Market currencies selloff, in early June. At that time, he wrote, “I have not been calling for an immediate popping of the emerging markets bubble yet; on the contrary, I wrote a report in April 2012 in which I discussed why ex-BRIC emerging market equities would likely rise sharply as the global “bubblecovery” or bubble-driven economic recovery continued to progress.” … “With talk of the Fed starting to withdraw from its more aggressive QE program, the U.S. Dollar has rallied (as I foresaw in early February), while emerging market currencies and bonds, as well as commodities prices have experienced sharp declines in recent months. The health of emerging market economies is tied very closely to commodities prices, and the commodities boom/bubble of the past twelve years is one of the main reasons why emerging market economies have been growing so rapidly. If commodities prices continue to drop, as I expect to happen when China’s resource-hungry bubble eventually pops, emerging market economies will get hit very hard. Citi economist, Ed Morse, has recently declared the end of the “commodities supercycle”, saying “China has reached a new phase, less focused on infrastructure and urbanization, both of which are highly commodity intensive.” Furthermore, $2.94 billion worth of capital has been pulled from emerging market equities in the week ending May 29, according to analysts at Barclays. Kit Juckes, a macroeconomic strategist at Societe Generale, said “As Fed policy reaches the mildest of turning points, emerging market assets are vulnerable across the board, the [South African] rand being the first of what I suspect will be a series of dominoes to fall.””

The combined ongoing Yahoo Finance Chart of Emerging Market Bonds, EMB, Emerging Market Currencies, CEW, and the Interest Rate on the US Ten Year Note, ^TNX, illustrates debt deflation, that is currency deflation, causing derisking and deleveraging out of fiat assets, such as Copper Mining Stocks, COPX, and nation investment, such Peru, EPU; which commence at the hand of the bond vigilantes calling interest rates higher; with currency traders following selling currencies short.

A number of ex-BRIC market sectors have risen, most surprisingly of all, given the fall in Major World Currencies, DBV, and Emerging Market Currencies, CEW, has been the usually currency sensitive Small Cap Pure Value Stocks, RZV; other significant risers have been PSCE, XRT, PPA, IHF, FDN, PBS, IAI, FPX, PJP, PJB, RXI, IYC, VCR, IGV, IBB, and KRE, all to new rally highs; these are nothing more that zombie investment sectors; equities presenting in “death rattle”.

The jump on the Interest Rate on the US Ten Year Note, ^TNX, to 2.01% on May 24, 2013, constituted an “extinction event”, that is a cataclysm, which literally destroyed the investment choice offered by bankers as the way of life, and terminated the paradigm of Liberalism. Jesus Christ is operating at the helm of the Economy of God, Ephesians 1:10, and has pivoting the world into the paradigm of Authoritarianism, where the diktat of nannycrats is the now the way of life. Fiat money died, and diktat money has been coming to life.

Jesus Christ did what Ron Paul could not do; He terminated the Fed, and not only that, He terminated fiat money, fiat wealth, and democratic nation state governance in one fell swoop .Acting in dispensation as steward of God’s household of all things political and economic, he fully completed Liberalisms’ crack up boom, which established a moral hazard based prosperity. And is now introducing Authoritarianism’s credit collapse and financial system bust, which will fully provide a debt servitude based austerity.

Tyler Durden of Zero Hedge reports Portugal socialists call for early elections If Portugal had hoped that as a result of this weekend’s political manoeuvering, which preserved the tenuous majority of the Coelho coalition cabinet by granting the previously resigned CDS-PP leader Paulo Portas the vice-premiership, thus “forcing” him to rescind his resignation and prevent a government collapse, it would project a vision of political stability, it may need to reevaluate as moments ago the leader of the Socialist Party (the biggest opposition party) Antonio Jose Seguro reaffirmed a call for Portugal to have early elections. Quote Seguro: “Our country is faced with the need to negotiate a new program, which may be called a precautionary program or anything else. Only a new government would have the democratic legitimacy to negotiate a new aid program for our country.” Seguro spoke to reporters in Lisbon after meeting Portuguese President Anibal Cavaco Silva.

The Financial Times reports Portugal president’s call for national unity backfires President Aníbal Cavaco Silva’s call for a “national salvation” agreement between the ruling coalition and the main opposition party, leading to early elections in June 2014, was intended to restore calm following a government crisis triggered by the resignation of two senior ministers.

But the president’s appeal for a cross-party deal in support of the country’s €78bn bailout programme prompted a fresh increase in bond yields on Thursday. “Portugal is in a deeper crisis than it was a week ago,” said Ricardo Santos, an analyst with BNP Paribas. “The president sought to ease volatility, but he has almost certainly increased it.” Silva ruled out holding an immediate snap election, saying this would significantly increase the risk of Portugal needing a second bailout. But he called on the three parties to agree on holding an early ballot next June, a year ahead of schedule.

Agreeing to Mr Cavaco Silva’s proposal would require António José Seguro, the opposition PS leader, to support €4.7bn in planned spending cuts and the potential laying off of tens of thousands of state workers, measures that he vehemently rejected until now. “It’s difficult to see how the president’s proposal can work given that the concessions involved could end the political careers of both the opposition leader and the prime minister,” said Mr Santos. Portugal was plunged into crisis last week after Paulo Portas, leader of the junior coalition party, resigned as foreign minister less than 24 hours after Vítor Gaspar also quit as finance minister amid tensions caused by government austerity policies.

Ambrose Evans Pritchard writes Constitutional crisis pushes Portugal closer to the brink. Yields on 10-year Portuguese bonds jumped more than 100 basis points to 7.85pc in a day of turmoil, kicked off by a government request to delay the next review of the country’s EU-IMF Troika bail-out until August.

President Anibal Cavaco Silva set off a constitutional crisis on Thursday when he vetoed a reshuffle by the two conservative coalition parties, insisting on a red-blue national unity government with greater legitimacy to see through austerity cuts until mid-2014.

Socialist leader Antonio José Seguro has so far refused to take part, demanding fresh elections to clear the air. “We must abandon the politics of austerity, and renegotiate the terms of our adjustment programme. The prime minister must accept that his austerity policies have failed,” he said.

Some Socialist leaders have threatened debt repudiation as a way of fighting back at Germany and the creditor powers, though that is not the party position.

Standard & Poor’s downgraded Banco Comercial, and placed a string of banks on negative watch. The agency appeared to endorse warnings that austerity overkill was making matters worse, saying continued fiscal cuts “are eroding the resilience of the private sector”. It said banks were building up a “high volume of problem assets”.

Ricardo Santos from BNP Paribas said it was unclear whether Portugal could withstand a further €5bn of cuts ordered by the Troika. “The bottom line is that the policy is not reducing the debt ratio. We think public debt will reach 130pc of GDP in 2014. The country is near the tipping point,” he said.

“Everybody has been saying that Portugal is so different from Greece but if this political crisis goes on for long, that won’t be so clear anymore.”

President Cavaco Silva has limited powers to force a deal on recalcitrant parties, but experts say it is hard to see how the current government can soldier on after such a blow to its authority. He may have to resort to the “nuclear option” of snap elections, opening the way for a fragmented parliament.

Sovereign bond strategist Nicholas Spiro said the events of the past 10 days had left premier Pedro Passos Coelho a “political cripple”, and brought reforms to a “screeching halt”. The crisis was prompted by the exit of finance minister Vitor Gaspar, the chief architect of Portugal’s crisis strategy, who stormed out complaining that he had been undercut by the junior CDS party in the coalition.

“Gaspar did make strenuous efforts to curb the budget deficit, but Portugal’s debt ratio kept on rising. There has to be a risk of another macroeconomic calamity on the scale of Greece and Cyprus,” said Tim Congdon from International Monetary Research.

Portugal has until now been held up as a poster-child of EMU austerity, praised for sticking to its bail-out terms. Failure at this stage would be a grave indictment of EU strategy itself. It would also force the eurozone to clarify its own crisis policies, exposing deep rifts. Europe’s leaders have vowed never again to force a sovereign debt haircut on banks and pension funds, deeming the experiment in Greece to have been calamitous.

This means they may have to violate the pledge or impose losses on their own taxpayers for the first time if Portugal needs debt relief. A study by Eric Dor from IESEG business school in Lille says an orderly debt restructuring by Portugal would cost taxpayers €16bn in Germany, €13bn in France, €11bn in Italy and €7bn in Spain, and twice as much in an EMU exit crisis. “There is a big probability that Portugal will need debt relief, unless you believe in fairytales,” he said.

The sheer scale of public and private debt leaves the country acutely vulnerable to deflation. Nominal GDP has fallen in each of the past two years. This has pushed net external debt to a record 230pc of GDP

Trading this week was awesomely bullish. The chart of the S&P 500, $SPX, SPY, shows a 2.9% rise to close at 1.680.00; it was the best week in the last six weeks; it stands at an Elliott Wave 5 High.

US Stocks, VTI, rose 2.9% to a new high; Germany, EWG, recovered 6.1%. Since May 1, 2013, it has been Peru, EPU, Chile, ECH, Turkey, TUR, Indonesia, IDX, Thailand, THD, and Brazil, EWZ, and the Emerging Market Mining, EMMT, leading the Emerging Markets, EEM, lower as is seen in their combine ongoing Yahoo Finance chart.

In the yield bearing equity sectors, Utilities, XLU, recovered 4.7%. Of the yield bearing sectors, Mortgage REITS, REM, together with Emerging Market Financials, EMFN, remain sold off since the “extinction event” of the rise in the Interest Rate on the US Ten Year Note, ^TNX, on May 24, 2013, as is seen in their combined ongoing Yahoo Finance Chart.

Equity sectors recovering included

Home Builders, ITB, 7.3%

US Infrastructure, PKB, 5.2%

Leveraged Buyouts, PSP, 3.8%

Equity sectors rising to new highs included

Biotechnolgy, IBB, 6.0%

Design Build, FLM, 5.2

Internet Retail, FDN, 4.9

Media, PBS, 4.3

Pharmaceutical, PJP, 4.3

Spinoffs, CSD, 4.2

Small Cap Pure Value, RZV, 4.1

IPOs, FPX, 3.8

Software, IGV, 3.8

Networkding, IGN, 3.7

Aerospace, PPA 3.7

Global Consumer Discretionary, RXI, 3.7

Consumer Discretionary, IYC, 3.6

Small Cap Industrial, PSCI, 3.4

Global Industrial Producers, FXR, 3.3

Automobiles, CARZ, 3.2

Food and Beverage, PBJ, 3.2

Semiconductors, SMH, 2.9

Retail, XRT, 2.8

Industrial, XLI, 2.7

The Interest Rate on the US 10 Year Note, $TNX, closed lower at 2.60%, enabling Aggregate Credit, AGG, to rise 0.92% this week.

Doug Noland reports The U.S. dollar index dropped 1.7% to 82.99 (up 4.0% y-t-d). For the week on the upside, the Norwegian krone increased 3.1%, the South African rand 2.2%, the Swedish krona 2.1%, the Mexican peso 2.0%, the Japanese yen 2.0%, the Danish krone 1.9%, the euro 1.9%, the Swiss franc 1.9%, the Canadian dollar 1.8%, the South Korean won 1.6%, the Singapore dollar 1.5%, the British pound 1.5%, the New Zealand dollar 0.9% and the Taiwanese dollar 0.4%. For the week on the downside, the Brazilian real declined 0.7% and the Australian dollar dipped 0.2%.

This week Commodities, DBC, rose 2.3%; the chart of Unleaded Gasoline, UGA, rose 7.7% and its daily chart shows that it has risen parabolically during July, suggesting that its rally is now complete; the chart of West Texas Intermediate Crude, $WTIC, rose 2.5%, to close at 106.24; the chart of Spot Gold, $GOLD, rose 5.8%, to close at $1,285, its best week in eight months, as the US Dollar, $USD, traded 1.8% lower to close at $83.12.

In the age of Authoritarianism, wealth can only be preserved by investing in and taking possession of gold bullion either in physical form or by trading on an Internet Platform such as Bullion Vault.

2) … How the Emerging Markets bubble inflated

Jesse Columbo writes in Bubble Bubble How the Emerging Markets bubble inflated. Though emerging market economies and assets had slightly deflated during the most acute phase of the Global Financial Crisis in 2008 and early 2009, they quickly rebounded due to the incredibly stimulative monetary policies of global central banks. China’s $586 billion stimulus program [1], an economic defense measure, led to a sharp surge in economic activity as the country built massive infrastructure “mega projects,” opulent government buildings and scores of entirely empty cities to create economic growth [2, 3, 4].

Soaring commodities prices helped to boost the fortunes of resource-rich emerging market economies and cushioned them from a good portion of the West’s economic suffering. (Note: not all emerging market economies that are currently experiencing bubbles are commodities exporters.)

In 2009 and 2010, emerging market asset bubbles began to strongly reinflate due to global carry trades in which investors borrowed capital from deflation-prone countries with low interest rates (like the U.S. and Japan) and deployed it into higher-yielding investments in non-deflation-prone economies such as those in emerging markets [5]. By late-2010, capital flows to emerging markets had risen to $825 billion – a level that exceeded the last peak in 2006-2007, while inflows to Asian economies rose 60% above their prior peak [6]. Dilma Rousseff, the President of Brazil and a trained economist, has frequently decried the large pool of speculative capital that has sought returns in emerging market assets, calling it a “liquidity tsunami” due to its ability to cause inflation, overheating and asset bubbles in emerging market economies [7]. The economic bubbles in Canada and Australia have inflated for similar reasons (rising commodities prices & carry trades) as the emerging markets bubble.

The U.S. Federal Reserve’s $600 billion Quantitative Easing 2 (QE2) program that began in the fall of 2010 caused commodities prices to surge and resulted in a new wave of fears over emerging market asset bubbles and economic overheating. In early 2011, the Bank of England’s Andrew Haldane warned of emerging market asset bubbles due to capital inflows from advanced economies [8] and the IMF warned of “signs of overheating” in emerging market economies [9]. By the summer of 2011, emerging market economies were red-hot and The Economist magazine published a “temperature gauge” to show which emerging market economies were most overheated, with Argentina, Brazil, Hong Kong and India at the top of the list [10]. Around the same time, Joachim Fels, a top Morgan Stanley economist, warned that the BRIC nations faced an “elevated risk of credit bubbles and rising defaults” [11] and BRIC banks began to show the signs of a credit crisis [12].

Emerging market economies and their equity markets have cooled somewhat since the summer of 2011 due to another flare-up of the Eurozone crisis, the ending of the U.S.’ QE2 program in June 2011, the U.S. debt ceiling debate and credit rating downgrade and China’s ongoing economic slowdown. Despite the slowdown in emerging market economies, their bonds and fixed income assets are still booming (along with their property markets) and attracting massive capital inflows [13], which is helping to fuel their explosive credit growth [14].

And there is an epidemic of Emerging Market property bubbles. The tsunami of global “hot money” has created an epidemic of international emerging market property bubbles in hubristic defiance of the lessons that should have been learned from the calamitous American and European real estate crashes. Naive emerging market property investors are most likely justifying their investments with the famous last words, “this time is different!”

The Emerging Markets Property Bubble is just one part of the “Post-2009 global housing bubble” or “Housing Bubble 2.0” that I have identified. Other regions with major property bubbles are Australia, Canada and Northern & Western Europe. Please click on the links to learn more about this very important global housing bubble.)

Cheap credit and soaring real estate prices have led to rampant “bubble drunk” behavior in emerging market countries. Singapore seems hell-bent on repeating the mistakes [15] made by Dubai during its mid-2000s bubble as it builds extraordinarily opulent vanity projects such as the Marina Bay Sands, the world’s most expensive standalone resort that looks like a cruise ship (and has a massive pool on top of it) [16], and an artificial forest comprised of 150-foot tall biometric “supertrees.” [17]

Singapore’s bubble economy is fueled by interest rates that are linked to the U.S.’ ultra-low interest rates, which are far too low for Singapore’s fast-growing and inflation-prone economy [18]. South Korea, whose citizens were among the best savers in world as recently as the late-1990s, now has the lowest savings rate in OCED as its consumers have been bringing on debt and spending so much money that they are beating notoriously profligate Americans at their own game. The average South Korean adult has nearly five credit cards and the country’s household debt burden exceeds that of the U.S. before the Global Financial Crisis [19, 20].

Brazilians have recently been on debt-fueled international shopping spree for luxury-goods that has boosted the fortunes of Florida and New York City [21] (which is one of the many reasons why our post-2009 economic recovery is actually a “bubblecovery.”) In India, where nearly 95% of the population lives on less than $2 per day, brand-addicted consumers are causing the luxury sector to boom [22] and Ferrari picked it as the country of choice to unveil its $687,000 FF four-seater [23]. While the West is mired in its worst economic crisis since the Great Depression, the luxury sector has the emerging markets bubble to thank for its exploding sales, including a vigorous start in 2012 [24]. Very few people realize that Europe’s economic situation would be far worse than it already is if it were not for the saving grace of booming luxury goods exports to emerging markets (another “bubblecovery” datapoint). When the emerging markets luxury bubble pops, the severity of Europe’s economic crisis will greatly increase. Emerging market economies and investment assets are experiencing a bubble of enormous proportions as their investors and consumers make the very same mistakes that the West made just a few short years ago. The Emerging Markets Bubble will pop when the bubbles in China and commodities prices pop and may lead to a crisis like the 1997 Asian financial crisis in the best-case scenario and a global depression in the worst-case, but highly likely scenario. Singapore and Hong Kong, with their finance and real estate-heavy island economies, may experience a similar fate to Iceland and Ireland in the 2008 financial meltdown. This time isn’t different.

3) … News of the rise of the King of the South as foretold in Daniel 11:11 and Daniel 11:40.

Egypt names New Premier amid disarray. Ex-Finance Minister Is Chosen to Lead Interim Government as Arab Nations Pledge Billions, While Divisions Widen. A former finance minister was chosen as Egypt’s interim premier under a six-month timetable for elections, as the country’s emerging post-coup government drew pledges of $8 billion in assistance from Arab supporters, in new attempts to bolster a democratic transition marked so far by divisions and violence.

Mr. Beblawi’s appointment, by the political alliance that supported the Egyptian military coup that forced Mr. Morsi from office on July 3, followed three days of negotiations and the Islamic Al Nour party’s withdrawal from the group. Mr. ElBaradei was given the post of vice president, to manage foreign affairs.

The appointment of Mr. Beblawi, who served as finance minister from July 2011 until December, shifted the emphasis away from political discord and toward the country’s pressing economic concerns.

Later Tuesday, the United Arab Emirates pledged $3 billion for Egypt’s new government, while Saudi Arabia pledged $5 billion in grants and loans “to help the Egyptian economy meet the challenges it currently faces.” Both wealthy Gulf nations were antagonistic to Mr. Morsi and publicly welcomed his downfall. They saw the rise to power of Mr. Morsi’s Muslim Brotherhood as a threat that could empower Islamist political movements at home, and were alarmed by Mr. Morsi’s overtures to Iran.

Egypt orders arrest of Muslim Brotherhood leader as group rejects cabinet offer. Egypt ordered the arrest of the Muslim Brotherhood’s spiritual leader and nine others for allegedly instigating violent clashes with the military this week that left more than 50 Brotherhood supporters dead, hours after the group rejected a plan to be part of the government’s new cabinet. The general prosecutor’s office said in a statement Wednesday that it issued arrest warrants for the general guide of the Muslim Brotherhood, Mohammed Badie, as well as his deputy and strongman, Mahmoud Ezzat. Eight other leading Islamists also were ordered to be taken into custody. The prosecutor’s office says the Islamist leaders are suspected of inciting the violence outside the Republican Guard building in Cairo on Monday that left 54 people dead.

5) An inquiring mind asks, Will excess reserves, now renamed Balances Maintained that exceed the top of the penalty free band, increase or decrease in value?

Robert Wenzel The excess reserve column is gone and replaced with Balances maintained that exceed the top of the penalty-free band. Notice that the new data point has just one data point, all the historical data about excess reserves is gone from the current release. Poof! Fifty four years of history, that show how Bernanke has created an insane excess reserves problem, is now relegated to the dust bins. From here on out, Balances maintained that exceed the top of the penalty- free band (formerly known as excess reserves) will show a starting number of $1.977 trillion, rather than the decades under $1 billion.

The Too Big To Fail Banks obtained these “securities” as part of POMO, and as part of QE, which were placed in Excess Reserves with the Fed.

One thing that might make the Balances Maintained increase in value, is more banks transferring their securities to the Fed; yet one thing that will make Balances Maintained decrease in value, is the Interest Rate on the US Ten Year Note , ^TNX, soaring in value as bond vigilantes call the Interest Rate higher, and as foreigners sell US securities to support their own currencies.

Candice Zachariahs of Bloomberg reports U.S. Treasury sales by Japanese investors exceeded purchases by a record in May amid the biggest monthly drop for the securities in more than three years. Money managers in the Asian nation unloaded a net 3 trillion yen ($30bn) of U.S. government bonds in a fifth straight month of overall sales that was the largest in data from 2005… In June, Japanese investors were net sellers of overseas debt valued at a record 2.96 trillion yen, taking the total to 10.6 trillion yen this year. That’s on track for the first net annual sales ever”

As the Interest Rate on the US Ten Year Note, ^TNX, rises, and as the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, steepens, seen in the Steepner ETF, STPP, steepening, then both the Too Big To Fail Banks, RWW, and the Regional Banks, KRE, will be be integrated either by diktat or by legislation, into the Government and be known as “Government Banks”. The banks will be part and parcel of government; their purpose will not be lending as it has been known, but rather check cashing, monetary control, and provisioning of diktat by statist public private partnerships, where regional nannycrats exericse oversight of the factors of production, commerce and trade.

6) Ben Bernanke, the King Of Credit, draws Defense, Aerospace, Consumer, and US Stocks, higher, with call for ongoing accomodative monetary policy.

This week, the chart of the S&P 500, $SPX, SPY, shows a 2.9% rise, to close at 1.680, manifesting an Elliott Wave 2 Up, on July 12, 2013, after having achieved a recent Elliott Wave 5 Up High, on May 21, 2013, as presented in Daneric’s post Elliott Wave Update, suggesting that the S&P 500, will be entering an Elliott Wave 3 Down; these are the most destructive of all economic waves, as they for all practical purposes wipe out all the wealth garnered on the previous five waves up.

The US Small Caps, IWM, rose 3.2% to a new high, and US Stocks, VTI, rose 2.9% to a new high; Germany, EWG, recovered 6.1%. Since May 1, 2013, it has been Peru, EPU, Chile, ECH, Brazil, EWZ, and the Emerging Market Mining, EMMT, as well as the Emerging Market Financials, EMFN, leading the Emerging Markets, EEM, lower as is seen in their combine ongoing Yahoo Finance chart.

In the yield bearing equity sectors, Utilities, XLU, recovered 4.7%. Of the yield bearing sectors, Mortgage REITS, REM, together with Emerging Market Financials, EMFN, remain sold off since the “extinction event” of the rise in the Interest Rate on the US Ten Year Note, ^TNX, on May 24, 2013, as is seen in their combined ongoing Yahoo Finance Chart

Of note the Elliott Wave Surfer chart of the EUR/JPY shows an Elliott Wave Top on May 24, 2013, when the Interest Rate on the US Ten Year Note, ^TNX, rose to 2.01%. This seen also in the Stockcharts.com chart of FXE:FXY. It was at this time that the leverage of carry trade investing collapsed, as is seen in the daily chart of the Optomized Carry Trade, ETN, ICI.

The Interest Rate on the US 10 Year Note, $TNX, closed lower at 2.60%, enabling Aggregate Credit, AGG, to rise 0.92% this week.

This week Commodities, DBC, rose 2.3%; the chart of West Texas Intermediate Crude, $WTIC, rose 2.5%, to close at 106.24; the chart of Spot Gold, $GOLD, rose 5.8%,to close at $1,285, as the US Dollar, $USD, traded 1.8% lower to close at $83.12.

The Great Unwind of the quantitative easing and accomodative policies of the US Federal Reserve is about to commence on the failure of credit, AGG, with a continuing rise in the Interest Rate on the US Ten Year, Note, ^TNX, and a continued steepening of the 10 30 US 10 30 Sovereign Debt Yield Curve, $TNX:$TYX, seen in the Steepner ETF, STPP, steepening, as bond vigilantes call Interest Rates higher. Debt deflation will intensify, resulting in an ongoing global currency war of competitive currency devaluation by currency traders successfully selling currencies short, causing derisking out of nation investment, EFA, IFSM, and destabilizing democracies.

MyBudget 360 writes The era of cheap debt is now reversing and the piper is demanding to be paid. The total US debt markets are now over 3 times our annual GDP. We have largely become a nation built on debt. (I comment, the world economic system has been built on a monetization of that debt). The US is increasingly borrowing money from the world. The world realizes that the Fed is merely bluffing so guess what? Money is now flowing back into US markets to purchase stocks, real estate, and other goods pushing up prices while the middle class is literally living paycheck to paycheck. This is one of the reasons how it is possible to have a booming real estate market, a record in the stock market, while the middle class shrinks, and 47 million Americans are on food stamps. To sum it up, global investors are calling the Fed’s bluff and are now diving into the US market to buy it up on the cheap with a growing erosion of US dollars.

The markets once realizing the Fed was reaching a reckoning when it comes to debt, decided to react as you would imagine. The move in ^TNX, pushes the 10-year Treasury rate to its highest level since 2011.

So you have inflation coming from outside forces while the middle class essentially has watched the Fed assist banks and Wall Street in parceling off pieces of the domestic economy to global buyers. The underlying key to remember is this is happening at the expense of the middle class given that the top echelon of our society has benefitted mightily from this arrangement. The reckoning is here and there is a limit to how much debt you can have while not adding any value domestically.

The combined ongoing Yahoo Finance chart of closed end funds CSQ, PTY, AWP, PFL, RCS, and EIM, communicates that the way is lower for World Stocks, VT, on the failure of Aggregagte Credit, AGG, as well as the World Major Currencies, DBV, and Emerging Market Currencies, CEW, despite this week’s rally in the S&P 500, SPY, and the Russell 2000, IWM.

The words, will and way of the world’s monetary sovereign, gave strong seigniorage to stock investments. The power of this week’s rally is seen in the chart of World Stocks, VT, in relation to Aggregate Credit, AGG, that is VT:AGG, rallying to its highest ever value, suggests that Liberalism’s moral hazard based, Peak Stock Wealth, VT, was achieved the week ending July 12, 2013, as investors used margin credit to take stocks to their likely peak achievement, on the leverage of the world central banks’ monetary policies of investment choice, and schemes of credit expansion, such as quantitative easing. CBS reports Stocks hit new high after Bernanke speech buoys investors, where he commented at a NBER event, “So you put that all together, and I think you can only conclude that highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy”.

On August 25, 2011, Victor Sperandeo wrote in American Spctator, The Fed’s Philosopher King. Ben Bernanke is arguably the most powerful man in the world. And he answers to no one. Having one man control the money supply of 311 million Americansis itself a fantastic and unreal notion. When you then consider the effects of the U.S. Dollar on the remaining 6.6 billion people on this planet, the idea becomes unimaginable. Meet Ben Bernanke: the dollar’s whimsical “Philosopher King,”and the Chairman of the U.S. Federal Reserve.He is arguably the most powerful person in the world, with powers far surpassing those imagined when his position was created. Who knew the Fed Chairman could become so influential?

If you think the rest of the FOMC has any oversight on the Chairman, think again. As the anointed “sun king of currency,” no Federal Reserve Chairman can long tolerate discord in his ranks. The pressure for the FOMC members to follow the lead of the Chairman is immense.

Granting the power to print an unlimited amount of paper“money” to one unelected individual is like playing monetary Russian roulette with a Glock. Have we forgotten that Sir Alan Greenspan is now criticized for policies that led to the subprime collapse, including keeping Fed Funds at 1 percentfor over a year at the start of the contagion? But no one saysa harsh word about the current Chairman for keeping Fed Funds at zero for 33 months and promising tomaintain zero Fed Funds for “atleast two more years,” even though the National Bureau of Economic Research (NBER) claims the recession officially ended two years ago (June 2009).

Who wins from this structure? The government of course, because they borrow more money than anyone else, just ahead of the Fortune 500 companies and Wall Street traders and speculators. The losers will be savers —those on fixed incomes, the middle class, and of course the global poor, who will suffer most because of inflationary increases in the cost of basic foods and fuel.

Jean-Baptiste Say (1767-1832) is generally credited with the creation of what is referred to as “Say’s Law”, the original version of what has developed into modern“supply-side” economics. The basic tenet of supply-side economics is that the level and extent of aggregate demand is a function of the long-term trend of innovations and new inventions. That trend is a direct function of the demand for workers and their productivity.

The number of workers demanded, and their productivity, in turn depends on the rate of capital investment by the private sector, which is caused by market demand and the quantity of innovations and inventions. These new products are driven — like almost all human endeavors — by incentives, and by a group of risk takers called entrepreneurs. These entrepreneurs are generally supplied with capital by a similar group of risk takers called venture capitalists, who measure each entrepreneurial opportunity as a ratio of risk to reward. These two groups thrive in direct proportion to the level of economic freedom, tax rates, and regulatory interference found in a nation.

Remember the internet and dot-com boom in the mid-1990s? Say’s Law operated with great results. Supply created demand as eBay, Yahoo, Amazon, Google, and many more great businesses flourished. Huge wealth expansion resulted for all, while the growth in profits and increased tax revenue created by these innovators helped balance the Federal budget. In the same period, Main Street saw 4 percent real GDP growth while employment increased across the board.

Now we need to return to an atmosphere of1990s-style innovation, but be even more vigorous. This can only be done with private investment and an atmosphere of acceptable risk.

It cannot beaccomplished by borrowing 40 cents or more of every dollar spent by the government, maintainingzero interest rates, and devaluing thereal U.S.Dollar by printing massive amounts of fiat paper money via a central bank under the banners of “quantitative easing” and“stimulus.” These government methods always fail because they are temporary and extremely expensive.

In order for America to get back on top, we need to focus on promoting an atmosphere of free markets and economic freedom, not onprinting stimulus dollars. Only free and functioning markets can create wealth. The current Federal Reserve is broken and completely at odds with the principles of a free market and a free people. It is destructive to the free market system to allow the whim of a “king”to rule over monetary policy and interest rates. We can pay now or pay later, but if we want to unleash American capitalism and the engine to turn the debt and the economy around, we must make the Federal Reserve a free market player instead of an imperfect monarch.

In as much as sovereignty begets seigniorage, that is moneyness, this week’s surge of seigniorage likely marks Liberalism peak sovereignty: World Stocks, VT, are at full leverage over Aggregate Credit, AGG, as is seen in VT:AGG. And Nation Investment, EFA, is at full leverage over World Treasury

Bonds, BWX, as is seen in EFA:BWX. The Milton Friedman, Free To Choose, Floating Currency, Banker Regime of democratic nation states has achieved its zenith in terms of political, economic and monetary power.

It is Jesus Christ, working in the economic and political administrative plan of God, Ephesians 1:10, who has produced Liberalism’s greatest, that is most complete, economic and political experience.

Liberalism was defined as the era of dividend investing, as investors trusted in the monetary authority of the world central banks to provide profits from global growth as well as stock buy backs by corporations provided by the cheap credit of Global ZIRP. Dividends Exluding Financials, DTN, regained its May 24, 2013, high this week. Perhaps the best of all dividend paying stocks have been the Energy Limited Partnerships, AMJ, such as GEL,TLLP, NGLS, WES, MMP, SEMG, TRGP, seen in their ongoing combined Yahoo Finance Chart together with Dividends Excluding Financials, DTN. Of great warning to Energy Limited Partnership investors, the price of Natural Gas, UNG, has fallen with the rise in Interest Rate on the US Ten Year Government Note, ^TNX.

Through “extinction protocol”, He released the Four Horsemen of the Apocalypse beginning in May of 2010 with Greek Bailout I. As presented in bible prophecy of Revelation 6:1-8, the Rider on the White Horse, who has a bow without any arrows, is transferring the baton of sovereignty, from democratic nation states to regional nannycrats, with a goal of terminating democracy throughout the world, first in Greece, with the provision of Three Greek Bailouts, second, in Cyprus with a Bailin of Cyprus bank depositors, and third in Egypt with a military coup.

When the Bretton Woods system, synonymous with the Milton Friedman Free To Choose floating currency system, really gives way, America’s Dollar Empire, that is the US Dollar Hegemonic Empire, and its globe-spanning archipelago of military bases, will collapse, and the Ten Toed Kingdom of Regional Governance seen in Nebuchadnezzar’s Statue of Empires of Daniel 2:25-45, will emerge, where ten regional zones of increasing iron diktat will emerge out of today’s clay democracy.

In the age of Authoritarianism, and its policies of diktat and schemes of debt servitude, wealth can only be preserved by investing in and taking possession of gold bullion either in physical form or by trading on an Internet Platform such as Bold Is Money or Bullion Vault. Suggested chart article reading includes Jack Chan’s This Week In Gold posted in Safehaven.com

7) Bellingham, the city of subdued excitemen, hosts many ecletic service businesses.

There is a great diversity of service businesses in Bellingham, WA; these include Vital Climbing Gym, Fur Ever Friends, and Perch & Play.

8) I reside in a den of libertines and psychopaths; yet live in Christ.

I reside in downtown Bellingham, in a SRO in the Sea Breeze Apartments, which is owned and operated by a small non profit corporation..

Thirteen years ago, at the time Europe started to use the Euro as a common currency, I moved as far north and west as possible, and still be in a city with public transportation within the US, hence I came to reside in Bellingham.

Beginning at the time of Greek Bailout I, in May 2010, I started to notice that the neighborhood became more poneros, that is not only libertine, but actually evil, and wicked, as people began to manifest with animal spirits, in particular those of bear, lion, and leopard, just as one sees in Revelation 13:1-4: I’ve been mauled emotionally and mentally many times by these psychopaths.

I turn on my psychopathic radar immediatly when leaving my cracker box; and continually sweep for their noticable characteristics: any white clothing, a wollen hat, or a cap, or a cowboy hat, social flare consisting of rudeness, loudness, or busybodyness. Once I spot them, I make every effort to turn away and avoid them.

Please consider that if there be a God, that He by definition would have the quality of Goodness; yes God be Good. And being the Genuine God, He desires to see the quality of goodness developed in His elect. So, He purposes to be active in the Blacksmith Shop, tempering his saints, applying His Hammer, forging them against the anvil of adversity, applying great heat to develop His qualities in those of His choosing, while discarding the reprobate.

It has been God’s providence introducing me to the harshness of many mean and crazy individuals, so as to produce His admirable attributes in me. I know one individual by name, who like George Zimmerman, is a neighborhood Guardian Angel; one who intimidates and emotionally bullies all who he can. He bears the marks of prison in that he has Jesus Christ, written on his knuckles, and has a cross, tattooed on his forearm like a knife: he’s a real killer as far as I am concerned. He lives in the same building and is relentless in confronting me about everything and anything. Yet I have never have spoken to him, nor have I even flipped him off.

I do not know what temptations or trials are coming; but I do know that the monetary authority of Ben Bernanke and the national sovereignty of the US is at its peak. Through dispensation, that is through the administration of Jesus Christ operating to produce the fullness and completion of every age, epoch, era and time period, Ephesians 1:10, inflationism is giving way to destructionism. And as a result regional monetary authority and regional sovereignty will provide the seigniorage of diktat and estblish governance enforcing debt servitude for all.

Just as investors placed their trust in Ben Bernake for profitable return, so resdents in each of the world’s ten regions will trust in a New Prophet for their survival; and according to Revelation 13:1-4, the level of trust will be described as worship, just as in the Apocalypse of the First Century.

John’s visionary experience contests Caesar’s claim. This is foundational for the unfolding drama of Revelation 4-16 (the second vision). God sits on the throne, not Caesar, and God remains on the throne despite Caesar’s attempts to unseat the Creator.

Revelation 4 identifies two sets of “celestial” participants around the throne of God. One set–the four living creatures–probably represents angelic figures while the other set–the twenty-four elders–represents human figures. In sum, angelic and human communities are present before the heavenly throne. They surround the throne with their worship, submission, and obedience.

The description of four living creatures before the throne is drawn from Ezekiel 1:4-21 and Isaiah 6:2-4. We may describe them as cherubim (look like Ezekiel) or seraphim (sing like Isaiah) though they are not so identified by John. Rather, as close to the throne, they may represent a kind of angelic hierarchy. Whatever the case, they represent God’s all-seeing (lots of eyes!) activity in the world who are never inactive in God’s cause or mission. They continuously praise the one “who was and is and is to come.”

I am motivated by Christ in me, the hope of glory. And am growing in spirtual understanding, so I can have wisdom in all things. I purpose to enjoy God’s Spirit, and become the New Man in Christ, forsaking carnality and iniquity, to live in God’s virtue and in His revelation of ethics as presented in the New Testament. I endeavor to keep His word of endurance, and not deny His Name, that is His Presence and Authority. To this end, in February 2013, I told my neighbors, who I have known for the last five years, “I am no longer speaking with anyone in the building in which I live”. I received a variety of responses; and now live by this new constitution, as a mean of protecting my sensibilities and purity.

1) … Introduction … Sovereign wealth is found only in the possession of gold bullion and the mandate of diktat.

The jump on the Interest Rate on the US Ten Year Note, ^TNX, to 2.01% on May 24, 2013, constituted an “extinction event”, that is a cataclysm, which literally destroyed the investment choice offered by bankers as the way of life, and terminated the paradigm of Liberalism. Jesus Christ is operating at the helm of the Economy of God, Ephesians 1:10, and has pivoting the world into the paradigm of Authoritarianism, where the diktat of nannycrats is the now the way of life. Fiat money died, and diktat money has been coming to life.

Benson te writes Quote of the Day: State democracy is a limited monopolistic democracy. Today’s democracy is a qualified democracy. Let us call it “state democracy”. It is a democracy entirely linked to and emanating from the concept of a single state as the sole sovereign political unit. All the rights just mentioned have to do with the “citizen” of a state and a political system equated with that state and its machinery. A citizen is not a person with free choice of a social-political-legal system. A citizen is a designation of a state-limited and state-defined set of rights that each person finds he has, whether he likes it or not.

State democracy is based on the principle of state sovereignty. The state’s power prevails. The citizens as a group and linked by particular political arrangements are associated with this sovereignty. Whatever the basis of this sovereignty is, nothing can stand in its way when a law or rule is formulated, passed and enforced. There is no check and balance from outside the system. One can only exercise the limited rights of protest, voting, moving and running for office that the state allows. State democracy is a limited democracy. It is a monopolistic democracy.

The incentive for individuals living in state democracy is to gain control over the machinery of government and to use it to one’s personal advantage by forming coalitions that pass laws that one wants. This is from retired finance pofessor Michael Rozeff at the lewrockwell.com

Liberalism’s Banker regime (which was based upon democratic nation states) had a policy of investment choice. The dynamo was one monetary interventionism, consisting of POMO, Quantitative Easing, Central Bank Interest Rate Reductions, Kuroda Abenomics, and Global ZIRP, which powered up corporate profit and global growth … and came with credit schemes, such as free trade agreements, financial deregulation, leveraged buyouts, nation investment, currency carry trade investing, securitization of debt, financialization of stocks and ETFs, and dollarization … where Milton Friedman’s Free To Choose concept of floating currencies and abandonment of the gold standard, established the rule underlying all investing, providing for the fiat money system.

Authoritarianism’s Beast regime (is based upon statist regional governance) has a policy of diktat. The dynamo is one totalitarian collectivism consisting of public private partnerships for oversight of the factors of production, banking, commerce and trade, which powers up regional security, stability and sustainability … and comes with debt servitude schemes, such as regional framework agreements, bank deposits bailins, new taxes, privatizations, capital controls, central bank rulings for capital adequacy consisting of national treasuries, and austerity measures … where Nannycrats establish the rule underlying all diktat, providing for the diktat money system.

Liberalism’s final currency carry trade invigorated, April 2, 2013, as the Euro, FXE, traded up 127.05, and the Japanese Yen, FXY, traded lower from 104.82, this being seen in the chart of FXE:FXY, and being seen in the Bloomberg chart of the EUR/JPY trading up from 119.79.

Yet the EUR/JPY devitalized on the jump on the Interest Rate on the US Ten Year Note, ^TNX, to 2.01%, on May 24, 2013, stimulating derisking out of World Stocks, VT, and yet compelled a rise in US Regional Banks, KRE, such as Community Banks, GBCI,FMER, PBCT,RNST, FFIN, and ZION, constituting Liberalism’s last safe haven investment. The EURJPY will continue to devitalize on a ongoing collapse of Aggregate Credit, AGG, on an ongoing rise in ^TNX, stimulating more derisking and delveraging out of World Stocks. VT. The debt monetization policies of the world central banks has created a carry trade investment, that is a hot money flow into US Regional Banks, KRE, on the rise of the US Dollar, best seen in its 200% ETF, UUP, and a fall in the all of the world’s currencies.

Debt deflation is underway, as Jesus Christ set the bond vigilantes and the currency traders loose on the markets; the first to call interest rates higher globally, and the latter to wage a currency war, one of competitive currency devaluation, on the world central banks, with the result of destruction of fiat wealth.

Beginning in November 2012, and then again in April 2013, Gold, GLD, relative to Commodities, DBC, that is GLD:DBC, strongly sold off; and recovered from its great sell off on June 28, 2013.

Now, the soon coming rise of Gold, GLD, from its bottoming out on June 27, 2013, and the fall of stocks, VT, will be seen in the ongoing MSN Finance Chart of Gold, GLD, Stocks VT, the 200% Long Yen, ULE, and the 200% Short Euro, YCS, where the fall in the Euro, FXE, will exceed, any fall in the Yen, FXY.

Tyler Durden asks Think gold and silver were the worst performing financial asset in June? Think again: that dubious distinction falls to the Bovespa, EWX, -12.4, the Shanghai Composite, SSCE, -12.3%, and the Greek stock market index, GREK, -12.2, all of which tumbled more than the precious metal complex did in the past month. Yet what an odd month for hard assets – on one hand WTI, Corn and Brent were the best performing assets, while gold, silver, copper and wheat tumbled. One thing is certain: as already noted, the number of gross shorts in gold is now at an all time high. And just as gold was one of the two worst performing assets of the first half (with silver), all that would require the unwind of this move, now that gold and gold miners are the most universally hated assets by the “expert” community, will be a short-covering catalyst.

Physical possession of Gold and Diktat will be the only two forms of sovereign wealth and thus sustainable wealth under the paradigm of Authoritarianism, and in the age of diktat.

An inquiring mind asks will there be improvement in economic fundamentals going forward and will Consumer Confidence, seen in Tyler Durden Chart, keep growing?

In as much as Jesus Christ has pivoted the world from Liberalism into Authoritarianism, there can be no genuine improvement in any economic fundamentals. The ratio of Stocks, VT, to Gold, GLD, that is VT:GLD, will be falling lower. Said another way the ratio of Gold to Stocks, GLD:VT, will be trading higher, as corporate profit and global growth fails, on the “extinction event” of the Interest Rate on the US Ten Year Note, ^TNX, jumping to 2.01% on May 24, 2013.

Interest rates, all across the yield curve, will continue to jump because of fears, first of credit liquidity, and second, that debtors will be unable to repay creditors, with the knock on fear that the world central banks monetary policies are unable to stimulate eorporate profit and global growth.

The recent growth of Consumer Confidence is consistent with Libersalism’s final inflationism, beginning with QE 1 and ending with QE4, causing a grand finale surge of M2 money, stated by the US Fed, with recent values of 10,594, 10590, 10579, 10557, 10541, as well as a surge in Automobile Stocks, CARZ, Retail Stocks, XRT, up until June 18, 2013, as see in their Yahoo Finance chart.

New Economic Action has commenced with Jesus Christ pivoting the world from inflationism to destructionism. Soon the M2 Money figures will peak and turn lower. Most of the Retailers, seen in this Finviz Screener, have turned lower as wealth is dissipating, as investors realize that the monetary policies of the world central banks, specifically policies of interventionism, of Quantitative Easing, POMO, Global ZIRP and Kuroda Abenomics, have made “money good” investments bad.

We must never tire of explaining the fallacies in the thinking of those who think the Great Recession is a clear case of the failure of capitalism. In fact, it is a quintessential example of the failures of interventionism to bring about anything other than economic destruction and relative impoverishment.

In a free market rooted in private property, the only way entrepreneurs are able to sustain profits is by serving customers better than anyone else. It is only when they receive special privileges through preferential regulation, subsidies, bailouts and the like that they are able to reap profits for which they have not sowed productive activity. I was struck by how much of what Mises said about the response of many to the Great Depression applies closely to our current situation. Just like Mises, we must never tire of explaining the fallacies in the thinking of those who think the Great Recession is a clear case of the failure of capitalism. In fact, it is a quintessential example of the failures of interventionism to bring about anything other than economic destruction and relative impoverishment.

I comment that the dynamo of the Banker regime was one monetary interventionism, consisting of POMO, Quantitative Easing, Central Bank Interest Rate Reductions, Kuroda Abenomics, and Global ZIRP, which powered up corporate profit and global growth.

Now, the dynamo of the Beast regime is totalitarian collectivism consisting of public private partnerships for oversight of the factors of production, banking, commerce and trade, which powers up regional security, stability and sustainability.

2) … Investment trading for the week of July 1, 2013 to July 5, 2013

July 1, 2013

IVCPOST reports that On Monday, US based stocks began the third quarter with 1% or more gain. Data regarding the kick off indicated United States’ manufacturing improved in June. It also showed that construction costs hit a four-year high. This year’s improvement was brought about by Fed’s bond-buying policy. This further aided in increasing Dow Industrials and S&P 500′s record high conclusion in late May. The recovery was interrupted by worries regarding Fed’s plans about their stimulus project. This sequentially triggered liquidation in stocks. Since October, June was the first negative month for S&P 500. Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh, said “People saw ISM was stronger and slightly higher than consensus and decided to run with it.” And Bespoke Investment Blog reports ISM manufacturing back above 50

The Beautiful Era indeed did totally and utterly end in 1914, as interventionism began in 1913, as a fulfillment of the Bible Prophecy of Daniel 2:25-45.

Now a global system of regionalism has replaced the interventionism of the two iron legs seen in Nebuchadnezzar’s Statue of Empires; where the first iron leg was the British Empire, and the second iron leg is/was the US Dollar Hegemonic Empire, that commenced with the establishment of the US Fed in 1910 to 1913. Liberalism flourished from 1913 with the passing of the Federal Reserve Act, until May 24, 2013, when the Interest Rate on the US Ten Year Note, ^TNX, quickly rose to 2.13%.

Now Authoritarianism is starting to rule in Europe. The very linchpin in the Economy of God, Ephesians, 1:10, is the nation of Greece, GREK, as the sovereign Lord God, has designed it and a collection of Mediterranean Sea states, known as the PIGS, for their profligacy, to be the beachhead for the rise of the Beast Regime of Revelation 13:1-4. The National Bank of Greece, NBG, continued strongly lower in trading today, as the Troika met with Athens to review progress on compliance of Bailout III terms.

The Yen, FXY, traded lower to close at 96.24; and all the other major currences, traded higher on today’s higher stocks. Action Forex provides the chart of the EUR/JPY, which rose to close at 129.622; this is also seen in the Stockcharts.com chart of FXE:FXY rising to close at 1.32.

I relate get ready for the great unwind of the EURJPY as Bloomberg report Record sales of foreign bonds by Japanese investors are signaling a bottom for the Yen, FXY, to traders who are trimming bets on further declines in the year’s worst performing major currency. Investors in the Asian nation offloaded 10.6 trillion yen ($106bn) of foreign debt in the first half of 2013, the most since at least 2001. .

Of significant ominous note, Utilities, XLU, which had been leading last’s week’s rally, traded lower. And the ratio of Transports relative Utillities, XTN:XLU, stands in the middle of a broadening top pattern, suggesting that the market expects the Interest Rate on the Ten Year Note, ^TNX, to rise higher from today’s 2.49% to start another bout of interest rate sensitivity selling.

Bloomberg reports Draghi’s one aize fits all rescue fuels northermost debt. The European Central Bank’s attempt to resuscitate the 17-member euro economy with record-low interest rates is fueling a debt boom in its most creditworthy country and exposing a growing disconnect in monetary policy. In Helsinki, about 1,500 kilometers (930 miles) northeast of the Frankfurt offices of ECB President Mario Draghi, household debt has surged to a record as Finns take advantage of the lowest mortgage rates in the euro area to buy property. Citizens of crisis-stricken countries from Greece to Portugal are either unable to get loans or forced to pay much higher rates.

Inflationary accomodative policies were cental to the bygone era of Liberalism, which was terminated by Jesus Christ on May 24, 2013, when the Interest Rate on the US Ten Year Note, ^TNX, rose to 2.1%. Now policies to cope with deflationary pressures, presenting debt servitude schemes, such as, regional framework agreements, bank deposits bailins, new taxes, privatizations, capital controls, and austerity measures, are central to the era of Authoritarianism.

Second, the US Dollar, $USD, traded higher to 83.76, and the individual world currencies, led by the Japanese Yen, FXY, trading lower, which closed down 1.0% at 97.25. The lower Yen, boosted the Nikkei, NKY, slightly higher.

Reuters reports China slowdown, Portugal tensions spook markets. World shares pulled back on Wednesday as signs of slowing Chinese growth and escalating political tensions in Portugal, one of the euro zone’s crisis hot-spots, spooked investors. European shares opened down 1.2 percent and euro zone periphery bonds tumbled after two high profile government resignations in two days threatened to plunge Portugal into a political crisis. Portugal’s bond yields surged more than 1 percentage point to 8 percent. Spanish, Italian yields jumped too while nervousness over the state of Greece’s next tranche of bail-out money also caused jitters

CNBC reports Portugal throws new curve ball in Euro debt crisis. Portugal faced a full-blown crisis on Tuesday after Foreign Minister Paulo Portas became the second minister to resign from the center-right government in a 24-hour period. Portugal’s Prime Minister Pedro Passos Coelho, speaking live on TV to the nation on Tuesday night said he had not accepted Portas’ resignation and would speak to his coalition partner. The leader of the opposition Socialist party speaking to the nation on TV on Tuesday night called for fresh elections and said the government had lost the confidence of the people.

The Portuguese government is on the rocks. The junior coalition partner the People’s Party (CDS-PP) will hold a meeting this afternoon to determine whether to support the government, if it withdraws support in parliament, elections seem inevitable, although they could be delayed for some months. Such a move would seriously hamper Portugal’s economic reform programme, which is already off track. Portugal has only met its deficit targets due to one-off measures while competitiveness adjustments have slowed and contingent liabilities remain a hidden risk. With the country on the cusp of an unsustainable debt burden any delays would likely be the final straw which pushes Portugal into needing some form of further assistance.

Contingent liabilities are significant. In many countries, the long-term burden of contingent liabilities such as pensions and healthcare are well known but in Portugal there are more immediate problems. The contingent liabilities of State Owned Enterprises (SOEs) total 9% of GDP but are excluded from government debt levels despite these companies coming under serious pressure. Many have significant debt overhangs and could be forced to turn to the government for assistance if financing conditions worsen once again. Total contingent liabilities could run as high as 15% of GDP according to the IMF. Furthermore, the stock of government arrears is around 2.6% of GDP (€4.3bn) and is owed to domestic firms meaning it remains a drag on growth.

Easing the reform programme is an option but may help little

Portugal has already seen its targets eased as well as the maturities of its loans extended and the interest rates reduced. There may still be scope to do this further, but not much. It is unlikely the eurozone would agree to such a move until a stable government is once again in control. Furthermore, with maturities and rates already extended and cut almost as far as is feasible further action seems unlikely. Delaying targets may give more room to breathe but Portuguese debt continues to look unsustainable.

So will Portugal need further financial assistance? Any delays would likely be tantamount to pushing Portugal towards further assistance, be it OMT or some form of debt restructuring, and consigning the country to another few years of tough austerity, which would be both politically and legally difficult to implement. As we previously noted, further assistance always seemed possible, Portugal will now have to work very hard to avoid needing it.

At market open Yahoo Finance and Reuters reports, Market turns attention to jobs, looking for clues to Fed Policy. Breakout Stocks are under pressure this morning on news of a major shake-up in Portugal’s government, escalating turmoil in Egypt, and more softness in Chinese manufacturing data. On the homefront, encouraging jobs data is helping to lift tide.

Benson te writes Ultimately it will be the global bond markets (or an expression of future interest rates) that will determine whether this week’s bear market will morph into a full bear market cycle or will get falsified by more central bank accommodation.

How true as Aggregate Credit, AGG, traded lower. The Interest Rate on the US Ten Year Note, ^TNX, traded slighly higher to close at 2.50%.

Bloomberg reports China Enters Nomura high domestic debt risk danger aone as Fed tapers. China, Hong Kong and India are in a “high-risk danger zone” because their monetary policies have stayed too loose over the past four years, according to Nomura Holdings Inc. A June 28 report by the bank’s economists and strategists showed the average ratio of domestic private debt to gross domestic product across Asia had ballooned to 167 percent in 2012 and most of the region’s property markets are “frothy.” The domestic private debt ratio has increased by over 50 percentage points in Hong Kong and Singapore and between 30 and 40 points in Malaysia, South Korea, China and Thailand. A measure of monetary policy based on output gaps and inflation shows that interest rates have also been persistently below what economic models suggest, and even more so if the financial cycle is accounted for, the report said. That leaves countries financially vulnerable. Indonesia is at the lower end of the high-risk zone, while South Korea, Malaysia, Singapore and Thailand are in the middle-risk range, ahead of Japan. The Philippines and Taiwan seem the least prone to any economic crisis. Hong Kong is a Special Administration Region of China although it pegs its currency to the dollar.

Bloomberg reports One third of China shipyards face closure as orders slump. China, the world’s biggest shipbuilding nation, may see a third of its yards shut down in about five years as they struggle to win orders amid a global vessel glut, an industry group said. The yards in peril of closure have failed to get any orders “for a very long period of time,” Wang Jinlian, secretary general of the China Association of National Shipbuilding Industry, said in an interview yesterday. They may end operations in three to five years if the “gloomy market persists.” The nation has more than 1,600 shipyards

July 4, 2013

The European Commission communicates that the introduction of the Euro beginning in 1999, and in 2001 for Greece, was a means of European integration to facilitate global growth and corporate profitability; make Europe a more powerful voice in the world, and developed the concept of a body of EU citizens, giving them a tangible symbol of their European identity. In common treaty, and thus in theory, there is to be no bailout of any nation whose Treasury Debt fails. And fiscal policy (public revenue and expenditure) remains in the hands of individual national authorities, although they undertake to adhere to commonly agreed rules on public finances known as the Stability and Growth Pact. And member States also retain overall responsibility for their structural policies (i.e. labour markets, pension and capital markets), but agree to co-ordinate them in order to achieve the common economic goals.

The battle to hold the Euro at 127.46 to 128.00 began on July 4, 2013, with the Finviz Chart of the Euro, FXE, showing a trade at 128.88, as the ECB announces a Forward Guidance Monetary Policy to keep all key ECB rates low for an extended period of time, as tightening in financial conditions will handicap the prospects for economic recovery in the Euro area, where the credit growth remains very weak and fragmented and as the Bank of England hints policy to remain loose.

Tyler Durden Zero Hedge report What the ECB’s Forward Guidance monetary policy means. Confused what the (non) news of today’s “unprecedented” forward guidance announcement by the ECB means? Shocked that the ECB is about as dovish as it has ever been, after having missed the following chart showing the record low European bank lending to the private sector which predicted all of today’s action (Stolper’s long EURUSD reco fade notwithstanding).

Then SocGen is here to explain, if only for all those who are seemingly stunned that the ECB isn’t planning on hiking rates, or even “tapering” any time soon. “Forward Guidance” Introduced, from SocGen

The ECB came out with all dovish guns blazing today to reverse the tightening in money and financial market conditions since June, stoking a rally in euribor futures (lower rates) but causing the EUR to drop nearly 1% vs the USD. The only thing that was missing today was a cut in the refi rate and/or negative deposit rate, but neither has not been ruled out given that downside growth risks continue to exist. Casting better macro data side, the ECB officially introduced ‘forward guidance’ on rates and said exit is “very distant”.

The introduction of ‘forward guidance’ characterises the fact that all key ECB rates will stay low for a longer period. This makes the ECB fall in line with the guidance by the US FOMC on the Fed funds target, the Bank of Canada and most probably, the BoE in August. Put on the spot during the press conference, president Draghi rejected claims the ECB had come off the proverbial fence in response to a changed outlook for US monetary policy given the spill over effect from a steeper US yield curve across the Atlantic and the steepening impact on eurozone core and periphery debt markets.

Taking after the BoE earlier (a coincidence, Draghi said), the ECB is worried that the tightening in financial conditions will handicap the prospects for economic recovery in the euro area where the credit growth remains very weak and fragmented. The move clearly marks an innovative step in the ECB’s communication and policy strategy for a bank that previously had always refused to pre-commit on interest rates.

Draghi did not commit explicitly how long rates would stay low but hinted that there would be no change for at least 12 months (“extended period is not 6 or 12 months”). The decision to introduce forward guidance was unanimous and how long this bias will be observed will depend on the assessment of three variables ie inflation, growth and monetary developments (credit flows, monetary aggregates). The case for a cut in the refi rate was also discussed but there was no agreement.

The retention of ammunition should the economy move back into reverse was important to the ECB and this probably explains why there was no consensus to cut the refit rate from 0.50%. Draghi categorically said that 0.50% is not the “lower bound” for rates. This implies that further stimulus is still possible. For EUR/USD, key support now rests at 1.2877 before selling towards the April 1.2746 low is stepped up.

I comment that the battle to the Euro at 127.46 to 128.00 is the battle to keep the Euro, FXE, as a viable currency, and is a battle for the ECB, and not the credit market to provide credit seigniroage, that is credit moneyness, and credit liquidity flowing to companies, even though higher nation state Treasury rates, are coming at the hand of bond vigilantes, making soverign borrowing more expensive. While European Financial Institutions, EUFN, and Nation Investment in Portugal, Italy, EWI, Greece, GREK, and Spain, EWP, as well as Ireland, EIRL, and Netherlands, EWN, Finalnd, EFNL, and Germany, EWG, are sinking, the ECB is fighting first, the bond vigilantes to provide low lending rates to companies, and secondly, currency traders to maintain the worth of the Euro through Forward Guidance monetary policy; and the Bank of England hints policy to remain loose.

Gary of Between The Hedges provides the Handelsblatt report ECB policy results lack legitimacy, Buch says. Many measures takes by ECB have had asymmetric results on euro-region members, causing redistribution of wealth, Claudia Buch, head of IWH economic institute and member of German govt’s council of economic advisers, says. The ECB isn’t mandated for such redistribution, she said. Buch sees danger that Europe faces situation like Japan, where “zombie banks” have financed “zombie companies”. And Gary of Between The Hedges provides El Confidencial report Spain banks hold $73.4b of Portugal debt. Spanish banks’ exposure to Portuguese sovereign debt represents 52% of total European banks’ exposure, citing Bank For International Settlement Data.

And the Gary of Between The Hedges providion of the Handelsblatt report ECB policy results lack legitimacy, Buch says communicates that the ECB has gone beyond its mandate and has become the Seignior, that is the EU Citizens’ Banker, which provides seigniorage, that is moneyness, with the effect of unifying all residents into a nascent European Super State, that is a EU Super State, as well as redistributing wealth, and as well creating “zombie banks” and “zombie companies”. The ECB’s monetary policies have facilitated sovereign debt, banking debt, and corporate debt moral hazard in the extreme, to the point where systemic risk now exists, and where European Socialism and the more extreme Greek Socialism, with its clientelism, has metastasized, to the point of being most definitely being unsustainable.

Please consider that all things are of God, 2 Corinthians 5:18. And as such, there is no human action as perceived by Austrian Economists. There be only the dispensation, that is the household sterwardship, of Jesus Christ, bringing forth the completion and fulfillment of every age, Ephesians 1:10.

The introduction of the Euro blossomed the standard of living in the southern nations compared to the northern nations, especially Germany, and enabled Cajas lending to stimulate a tremendous real estate boom and consequential bust, swelled municipal and state employment, and enabled nation state wage legislation to grow labor unions in power to the point where Nation Investment, EFA, has failed because of high unit labor costs, and as the El Confidencial report Spain banks hold $73.4b of Portugal debt, indicates supported a huge debt trade boom, and the Tyler Durden Zero Hedge report What the ECB’s Forward Guidance monetary policy purpose is to establish the ECB, and not the credit market, as provider of credit seigniorage, as well as Seignior, that is top dog banker, establishing the worth of the Eurozone’s currency.

Where seigniorage exists, that is moneyness exists, sovereignty exists. The ECB, through its monetary policies, has established defacto pooled sovereignty. And it is either out of soon coming EU nation state sovereign default, and or banking default, or out of a global credit bust and financial system breakdown, that is a Financial Apocalypse of Revelation 13:3-4, will occur, and be the genesis event for political leaders to renounce national sovereignty and announce pooled sovereignty, establishing an EU Super State, that is a One Euro Government, with oversight of fiscal spending, banking, manufacturing, commerce and trade, by nannycrats who will govern through statist public private partnerships.

According to bible prophecy of Revelation 13:1-4, Regionalism will replace Crony Capitalism, European Socialism, and Greek Socialism, beginning in Europe, and spread to all of the world’s ten regions, and Totalitarian Collectivism, will become mankind’s social experience, as the Beast Regime replaces the Banker Regime, in all of mankind’s seven institutions. By Christ’s Sovereignty, Ephisians 1:10, it is out of Eurozone sovereign insolvency and banking insolvency, that regional governance will replace democratic state governance. Liberalism is powering down, as the dynamos of corporate profitability and economic growth are winding down. Authoritarianism is powering up, as the dynamos of regional security, stability, and security, are winding up.

The rise of the interest rate on the US Ten Year Note, ^TNX, to 2.01% on May 24, 2013, at the hands of the bond vigilantes was an “extinction event” that terminated Liberalism’s Banker, Free To Choose, democratic nation state floating currency regime, whereby the fiat money system died. Under Authoritarianism’s Beast, Diktat, regional governance and totalitarian collectivism regime governs, and the diktat money system underwrites economic action.

Under Liberaglism, nation state bankers waived credit wands, providing seigniorage of investment choice. But under Authoritarianism, regional nannycrats yield debt servitude clubs of diktat; thus under Authoritarianism, the debts of Liberalism, will be applied to every man, woman, and child on planet earth, beginning first in the EU.

July 5, 2013

The battle, which began on July 4, 2013, to maintain the Euro, FXE, at 127.46 to 128.00, was the battle to keep the Euro, as a viable currency, and which was a battle for the ECB, and not the credit market to provide credit seigniroage, that is credit moneyness, and keep credit liquidity flowing to companies, lasted only one day, as on July 5, 2013, the Euro, FXE, collapsed to 127.10.

The Action Forex chart of the EUR/JPY shows a close at 129.80; the Stockcharts.com chart of FXE:FXY closed this week at 1.314.

The see saw destruction of wealth that came with the “extinction event” of the rise of the Interest Rate on the US Treasury Debt, ^TNX, to 2.01%, on May 24, 2013, continued today, July 5, 2013, as US Stocks, VTI, led World Stocks, VT, and Global Industrial Producers, FXR, higher.

On July 5, 2013, all hell broke loose in the bond market, as Jack Ewing and Julia Werdigier of the NYT report Answering critics who said they were running out of ways to promote growth and lending, the European Central Bank and the Bank of England on Thursday did something neither had done before, committing themselves to keeping interest rates low indefinitely. The bid to reassure investors brought the two central banks into closer alignment with the Federal Reserve, which, under Chairman Ben S. Bernanke, has adopted a policy of becoming more open about its intentions. Mario Draghi, the president of the European Central Bank, said that crucial interest rates would ‘remain at present or lower levels for an extended period of time.’ Until Thursday, the central bank had steadfastly refused to pin itself down on future policy. Only hours earlier, Mark J. Carney, who became governor of the Bank of England on Monday, made a similar break with tradition. The British central bank said that any expectations that interest rates would rise soon from their current record low level were misguided.

Fion Li of Bloomberg reports The cost of borrowing in Hong Kong’s Dim Sum bond market, DSUM, jumped the most on record in June, climbing to an all-time high as China’s worst cash squeeze in at least a decade spurred concern an economic slowdown will worsen. The average yield on the securities surged 153 bps, or 1.53 percentage points, to 5.06%, the most since the Index was introduced at the start of 2011. ‘The outbreak of one of the worst liquidity crunches in China’s interbank market has spilled over to offshore,’ said Becky Liu, a Hong Kong-based rates strategist at Standard Chartered Plc, the second-largest Dim Sum bond underwriter. ‘A sharp rise in the cost of funding on the back of tight liquidity has pushed up bond yields. Daily Bell reports Now they tell us: China debt levels ‘unknown’.

Credit collapsed, as evidenced in the strong fall lower of Aggregate Credit, AGG. Margaret Collins of Bloomberg reports Fixed-income mutual funds in the U.S. had their biggest weekly redemptions in more than six years as investors fled bonds. Credit trading lower today included the following:

sold a record amount of US Treasury debt last week while bond funds suffered the biggest ever investor withdrawals.

Ongoing selling by foreign central banks could be driven by two key dynamics. First, one would think (thinly capitalized) central banks would seek to contain losses on their outsized bond holdings. Keep in mind that the higher bond yields jump, the more individual central banks will need to monitor the scope of losses and the degree of capital impairment. Second, “developing” central banks will most likely be forced to sell Treasuries and other bond holdings to fund investor and “hot money” flows exiting their markets and economies.

A prominent bullish view has held that emerging market (EM) central banks built up robust international reserve positions (including large quantities of Treasuries) that would be available to backstop their systems in the event of global market turbulence. Well, a surge of outflows (and currency market intervention) coupled with a spike in yields is now in the process of depleting reserves much more quickly than anyone had anticipated. There is a clear possibility that we’re early in what could be unprecedented flows seeking to exit the faltering EMs. Recalling the 1997 SE Asian experience, it was a case of “those who panicked first panicked best.” The more reserve positions were depleted, the faster “hot money” ran to the rapidly closing exits.

Importantly, the longer the inevitable day of reckoning is delayed the worse the consequences. Years of aggressive market intervention ensured a most protracted period of unprecedented excess – excesses that encompassed virtually all markets and all risk categories. Perhaps Federal Reserve policymaking ensured that the greatest Bubble excesses and market distortions materialized in perceived low-risk (fixed income and equities) strategies.

“The danger of mispricing risk is that there is no way out without investors taking losses. And the longer the process continues, the bigger those losses could be. That’s why the Fed should start tapering this summer before financial market distortions become even more damaging.” Martin Feldstein, Wall Street Journal op-ed, July 2, 2013

I appreciate Mr. Feldstein’s focus on “the danger of mispricing risk” – I only wish this would have been part of the monetary policy debate starting a few years back (before the damage had been done). I would argue that never has so much mispriced debt been issued on a global basis. Moreover, never have inflated bond prices – artificially low borrowing costs – had such a profound impact on securities and asset pricing around the world. Never have risk perceptions and market risk premiums in general been so distorted by aggressive central bank market intervention.

The mispricing of risk implies market re-pricing risk. And the greater the mispricing, in the volume of securities issuance, price level distortions and risk misperceptions, the greater the scope of Latent Bubble Market Risks. Mispricing also implies wealth redistribution, and this has traditionally been from the less sophisticated to the more sophisticated. Actually, when enormous quantities of non-productive debt are issued at artificially high prices there is initially a perceived increase in wealth (more debt instruments at higher prices). This debt (“bull market”) expansion coupled with perceived wealth creation will spur spending, corporate profits and higher equities and asset prices. But when the Bubble begins to falter, with re-pricing, market losses, risk aversion and tightened financial conditions, the downside of the Credit cycle commences.

I believe we have commenced a “repricing” process that will unfold over weeks, months and years – with vast ramifications and unknown consequences.

Various reports claim the strong market reaction to Bernanke’s policy statement caught the Fed by surprise. Despite attempts by various officials to calm the markets, bond yields have just kept rising. As such, it’s now reasonable to suggest the Fed did not anticipate being on the wrong side of a spike in market yields. How much higher do Treasury bond and MBS yields need to rise before the Fed is held to account – and forced to explain – the large losses suffered in its $3.4 TN (and ballooning) portfolio? At this point, the Federal Reserve is akin to a novice trader that keeps adding to a losing position.

Market players have surely been stunned by how poorly the bond market has traded – especially with the Fed providing $85bn of monthly support. Assuming the Fed cannot keep purchasing Treasuries and MBS forever, perhaps there is now added impetus for investors, hedge funds, foreign central banks, sovereign wealth funds and others to push liquidations forward. If money managers now realize they are holding higher risk exposures than desired, it might be advantageous to make necessary portfolio adjustments prior to the Fed winding down its QE operations. If foreign central banks have begun a process of reducing bond holdings, does this accelerate hedge fund selling? Are the sophisticated players now anxious to reduce holdings before the next wave of bond fund redemptions and ETF-related selling? How does it work when the “Masters of the Universe” – having accumulated Trillions of assets under management by adeptly playing a most-protracted market Bubble – find themselves on the wrong side of rapidly moving markets?

I am intimately familiar with the bull story for U.S. equities. Corporate profits are strong and stock valuations are attractive. Bond yields are rising because of the underlying strength of the U.S. economy. The “great rotation.” The U.S. economy remains the most vibrant in the world. U.S. equities are the preferred asset class for the current environment. (Witness the rally in US Regional Banks, KRE, and the Russell 2000 Growth, and the Small Cap Pure Value Growth, IWO, as is seen in their ongoing combined Yahoo Finance Chart).

Well, the U.S. stock market is an integral facet of the greater Credit Bubble. Massive federal deficits, ultra-loose financial conditions and artificially low borrowing costs have been instrumental in inflating profits. Mispriced debt and meager risk premiums have been instrumental in myriad financial engineering mechanisms that have inflated corporate earnings and inflated stock prices. Abundant cheap finance has fueled a powerful global mergers and acquisition boom. (Witness the rally in IPOs, FPX, and Leveraged Buyouts, as is seen in their ongoing combined Yahoo Finance Chart).

If the Bond Bubble is indeed bursting, the markets are only in the earliest phase of re-pricing risks and asset prices (The Bond Bubble burst in May 2013, causing debt deflation, that is curreny deflation as is seen in the fall lower of Bonds, BND, together with Major World Currencies, DBV, and Emerging Market Currencies, as is seen in their ongoing combined Yahoo Finance Chart).

After leading unsuspecting savers into the wild world of mispriced fixed income instruments, the Fed will apparently ensure the public becomes overly exposed to unappreciated risks in the U.S. equity market. (Unprecedented risk is seen in ongoing Yahoo Finance Chart of Biotechnology, IBB, the Russell 2000 Growth, IWO, the Small Cap Pure Value Growth, RZG, and Aerospace and Defense, PPA).

I relate that debt deflation is seen in the collapse of individual currencies, and the rise of the US Dollar, $USD, swhose chart show a blast higher to close at 84.71. The Milton Friedman Free to Choose floating currency system, synomous with the Banker Regime of credit was literally destroyed, as bond vigilantes called the Interest Rate on the US Ten Year Note, ^TNX, higher to 2.72%, and as currency traders continued their global currency war on the world central bankers. The 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, steepend sharply, as is seen in the Steepner ETF, STPP, steepening, better said, blasting vertically higher.

Currency traders were successful in carrying out their currency war of competitive currency devaluation as currencies falling lower included:

And Doug Noland reports The U.S. dollar index jumped 1.6% to a three-year high 84.45 (up 5.9% y-t-d). For the week on the downside, the South African rand declined 3.2%, the Norwegian krone 2.9%, the British pound 2.1%, the Japanese yen 2.0%, the Swiss franc 2.0%, the Swedish krona 1.5%, the Danish krone 1.4%, the euro 1.4%, the Mexican peso 1.1%, the Singapore dollar 1.1%, the Brazilian real 0.9%, the Australian dollar 0.8%, the Canadian dollar 0.6%, the New Zealand dollar 0.4% and the Taiwanese dollar 0.2%.

US Regional Banks, KRE, continued their rally, blasting a stunning 2.8% higher; which drove the Russell 2000 Growth, IWO, and the Small Cap Pure Value, RZG, to new highs. Other financial sectors trading higher included

IAI 1.9

KCE 1.9

RWW 1.6

IXG 1.0

Laura Marcinek and Donal Griffin of Bloomberg report Barclays Plc, BCS, Deutsche Bank AG, DB, and Credit Suisse Group AG, CS, had their credit ratings lowered by Standard & Poor’s as new rules and ‘uncertain market conditions’ threaten their business. The four European lenders are among the most exposed to proposed rules that could reduce revenue from trading and investment banking operations, the ratings firm said. ‘We consider that these banks’ debtholders face heightened credit risk owing to the industry’s tighter regulation, fragile global markets, stagnant European economies and rising litigation risk stemming from the financial crisis,’ S&P said. ‘A large number of global regulatory initiatives are increasingly demanding for capital market operations.’

Bloomberg reports Chinese banks’ valuations, CHIX, are close to their lowest on record as the nation’s interbank funding crisis exacerbated investors’ concern that earnings growth will stall and defaults may surge as the economy slows. Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, ended Hong Kong trading last week at 5.3 times estimated earnings. Investors’ disenchantment with Chinese banks reflects concern that a crackdown on shadow banking and measures to direct new credit away from repaying old loans and toward boosting economic productivity will undermine earnings and trigger a surge of bad loans. ‘The golden era of banking is over,’ said Mike Werner, an analyst at Sanford C. Bernstein. ‘Investors have to recognize that more market discipline is going to be imposed upon the banks.’

Lingling Wei and Bob Davis of WSJ report A rare peek into the actions of China’s leaders in a month when a Chinese cash crunch spooked global investors shows a leadership falling short in its struggle to redirect China’s economy and also faltering in its efforts to communicate its intentions to markets. The People’s Bank of China instigated the cash shortages that catapulted Chinese interest rates to nosebleed highs during the past two weeks because the central bank felt it had no alternative amid what it saw as out-of-control credit growth, according to an internal document. Since 2009, Chinese domestic debt has been growing so rapidly it approximates credit bubbles in the U.S., Europe, Japan and Korea that precipitated recessions. In the spring of 2013, the central bank and banking regulators tightened regulations but to little avail. For the first five months of 2013, domestic credit, called total social financing in China, rose 52% from 2012. According to a summary of a PBOC internal meeting on June 19, the central bank was especially concerned that in the first 10 days of June, Chinese banks increased lending by 1 trillion yuan ($163bn), an amount the central bank said ‘had never been seen in history.’ About 70% of that amount consisted of short-term notes that mostly don’t show up on banks’ balance sheets, making it easier for the banks to get around regulatory lending restrictions, rather than lending the money to promising companies or projects.

Reuters reports A senior Chinese official said on Friday that the government did not know precisely know how much debt local governments had built up and warned that it could be more than previous estimates. Estimates of local government debt range from Standard Chartered’s 15% of the country’s GDP at end-2012 to Credit Suisse’s 36%. Fitch put the figure at 25% when it downgraded China’s sovereign debt rating in April. Vice Finance Minister Zhu Guangyao said China had not released official figures since a 2010 auditing report that put local government debt at 10.7 trillion yuan. ‘Currently, [according to] nationwide surveys, I think this number will rise,’ Zhu said, defending the debt as mostly geared toward fuelling infrastructure projects. ‘A very important task for this administration is to clearly determine the level of local financing platforms,’ Zhu told reporters.

Kristine Aquino and Rachel Evans of Bloomberg report China’s top-rated dollar-denominated bonds are losing more than any other BRIC nation as a record cash crunch threatens to slow economic growth and strain corporate finances. Chinese notes, the only gainers in March as debt from Brazil, Russia and India slumped, lost 6.1% last quarter, the most in Bank of America Merrill Lynch indexes going back to 1999. Company debt tumbled as overnight borrowing rates jumped to the highest level since at least 2003. The surge fueled concerns about nonpayment as People’s Bank of China Governor Zhou Xiaochuan seeks to rein in risky lending while reviving the world’s second-largest economy. The premium investors demand to hold Chinese dollar debt surged to a 10-month high of 225 bps on June 26, 2013.

Bloomberg reports China’s crackdown on shadow banking is backfiring as a plunge in stocks prompts individual investors to pump increasing amounts of cash into wealth management products that offer yields more than double the deposit rate. A record 1,137 of the investment plans were sold by about 70 banks in the last two weeks, almost 50% more than the similar period ended June 14, according to Benefit Wealth. China Minsheng Banking Corp., the nation’s first privately owned lender, last week sold a 35-day product with an annualized yield of 7%.

Energy Service, OIH, rose 1.8%, Small Cap Energy, PSCE, 1.7%, and Energy, XLE, 1.2%, as Oil, USO, blasted 1.8% higher. West Texas Intermediate Crude, $WTIC, rose parabolically to a 14-month high to close at 103.63; futures capped the biggest weekly gain in more than two years. Oil, USO, joined US Regional banks, KRE, in being a safe haven investment this week.

The Emerging Markets, EEM, traded lower yet again. Alex Frangos and Patrick McGroarty of the WSJ report Countries from Turkey to Brazil to China are getting hit by a brutal combination of events, as economies slow, investors pull out cash, commodity prices tumble and protesters take to the streets. An outflow of funds from so-called emerging markets has picked up pace over the past month, triggered by expectations among some investors that the days of easy money globally are coming to an end. It is a stark turnaround for these countries, whose growth helped offset weakness in the U.S. and Europe during the financial crisis. Seeking better returns, investors poured money into emerging market economies in the past four years. Private capital flows into emerging markets from 2009 to 2012 were $4.2 trillion, according to the Institute of International Finance. While the amount of money leaving these markets hasn’t reached levels seen during the 2008 crisis, the outflows are expected to continue as sentiment sours further.

3) … Are we witnessing, the rise of the Bible prophesied, King of The South; who will this individual be?

3A) … An uprising ocurs in Egypt.

Tyler Durden of Zero Hedge reports Egypt’s Morsi still President as ministers resign, Muslim Brotherhood offices destroyed. With over a million people crowded into the streets of Cairo (and 16 reported dead and 781 injured according to The Jerusalem Post), the situation in Egypt is becoming more unstable. Amid cheers of “the people demand the fall of the regime,” protesters set fire to and ransacked the Muslim Brotherhood’s main offices all over Egypt. Many saw this as another victory towards their goal of Egypt not being ruled under Islamic law noting, that they “feel victorious, but we’ll only have truly won once Morsi leaves.” It seems the pressure is building as five Egyptian ministers have just resigned amid the growing chaos.

When coups happen, people do not get more socialism, they usually get put down and the old regime status quo is imposed violently. Opposition parties are eliminated. Fake elections happen as will happen in Egypt once half of the political spectrum is removed. The Saudis think this will save them from the fury of the mobs who hate them. Instead, it will cement the hatred. As the average Egyptian, unhappy with IMF rules, discovers the military and Elbaradei appointed as Egypt’s interim PM (the loser in the previous election who is put in power today!) the IMF and others praise this claiming ‘technocrats’ (1984 double speak for ruthless enforcers of banker’s whims) will take over.

The people will be put on a Gaza Starvation Diet. They won’t have subsidized fuels or food. Like in the US, the demand the poor and lower workers pay 100% of the costs of running a country will prevail. Think the ’47% moochers’ business is what Elbaradei believes? Of course!

Al Jazeera’s Jamal Elshayyal, reporting from Nasr City, said the reaction from the Morsi’s camp to the appointment of Elbaradei was one of complete rejection and anger.

“One of the protesters here said that the appointment of ElBaradei is a move directed at appeasing the United States and that he served them well, allowing for the invasion of Iraq when he was in the IAEA and will now be their puppet again – we all know he is a puppet.

Elbaradei called for Bush to be charged with war crimes over the illicit Iraq invasion, for example, so he isn’t a total ‘US puppet’. The military don’t want him to lead them, they are using him as a front so they can cement power again as the generals, as per usual in the past, work out who is going to be the New Big Boss. He will be disposed eventually but only after he is blamed for IMF programs just like Morsi. The effects of the IMF ‘starve the poor’ actions will make anyone unpopular. The poor UN nuclear inspector is a puppet but not the way the people in the streets know it. He won’t last long if he defies the bankers.

The coup in Egypt just raised world fuel prices which is OK with Russia but this is causing Egypt-style demonstrations and rage in Europe like here: Bulgaria anti-govt protest high fuel bills.

Authorities: Armed man arrested in Seattle was planning action in support of Brazil protesters : like all teeming countries with lots of poor people and an attempt at a popular government, when the banks demand punishment for running in the red, this is inflicted on the poor. So Brazil, trying to get ready for the obscene Olympic ‘sports’ which are mainly pros thanks to changes in the rules, we have the government ‘cleaning up’ the cities which means removal of poor people.

This, in turn, causes demonstrations and riots. The US which was so very supportive of using the military to overthrow a government in Africa due to some demonstrations over IMF rules will do the same to Brazil. The US has done this repeatedly to Brazil in the past. The most recent was the 1964 Brazilian coup d’état. The US CIA has huge reasons for another coup there. Greenwald, the Guardian reporter who broke the Snowden whistleblower case lives there and is protected there. They are very anxious to get their paws on him and to Gitmo him.

3B) … Bible prophecy in the Book of Daniel, foretells that one known as the King of the South, will arise out of an Egypt African Islamic power block, only to be defeated by the future World Sovereign, presented in Revelation 13:5-10, known as the King of the North.

Daniel 11:11 provides into the one who will arise out of and lead the Egypt African Islamic power block. “And the king of the South shall be moved with rage, and go out and fight with him, with the king of the North, who shall muster a great multitude; but the multitude shall be given into the hand of his enemy”

Daniel 8:23-24 provides details on the future King of the North. “In the latter part of their reign, when rebels have become completely wicked, a fierce-looking king, a master of intrigue, will arise. He will become very strong, but not by his own power. He will cause astounding devastation and will succeed in whatever he does. He will destroy those who are mighty, the holy people”.

It is easy to demonstrate that HWA’s WCG did teach that there would be a future King of the South and who WCG believed it would be. Here is a quote from the August 1974 Good News article by Raymond McNair titled Watch the Middle East where he stated: he longest prophecy of the Bible, the eleventh chapter of Daniel, specifically concerns the Middle East…verses 40-45 are yet to be fulfilled. They reveal that startling events are yet to take place in the Middle East… (p.12).

Thus, WCG was teaching, under HWA for at least the last 22 1/2 years of his life, that at least from verses 40 and on, that portions of Daniel 11 were yet to be fulfilled (also HWA specifically taught that Daniel 11 had final fulfillment of early verses as well; see the also article on the King of the North). Any who teach that HWA did not teach that there were future fulfillments of Daniel 11 simply have not understood the totality of his writings. Notice specifically one of them: In Daniel 11:21, referring in original, typical fulfillment to Antiochus Epiphanes, there shall stand up a vile person…So once again before the second coming of Christ, a Vile Leader will stop the daily sacrifices being offered…This same prophecy spoken by Jesus is also reported by Luke…21:20-24 (Armstrong HW. Personal, Plain Truth magazine, June 1967).

It is clear that HWA’s WCG taught that there would be a future king of the South. Also notice something from 1972: comment Then at least a part of Daniel 11 must also be DUAL! And no wonder, for we find the chapter concludes with the “time of the end” (verse 40) – leading up to the resurrection of the saints (chapter 12 :2). (In the original text, there is no chapter break between Daniel 11 and 12.) (Ambassador College Bible Correspondence Course, Lesson 2, World Peace Coming in Our Time! 1972 edition, p. 14).

Thus, since Daniel 11:40-45 discusses the King of the South, those who are willing to see the truth will realize that as of 1972, the old WCG did teach that there was a coming future King of the South in 1972.

Garner Ted Armstrong in a May 3, 1975 Plain Truth article titled Watch the Middle East wrote

Prophecy says some sort of a ‘shoving match’ precipitated by the ‘King of the South’ will unleash whirlwind lightening-like MILITARY response by a ‘King of the North’. So these quotes from the literature show that WCG did believe in a future ‘King of the South’, but did not clearly identify who, in a December 1979 Plain Truth article by Keith Stump titled The Arab World in Prophecy it states But who is the “King of the South”?…in verse 40 we skip to “the time of the end”…The verse undoubtedly found partial fulfillment in the offensive of 1896…But Mussolini did not finish the prophecy

Just as there is yet to be a final “king of the north”…there may very well emerge in the same manner a final “King of the South”–an overall leader of an Arab-Moslem confederation, possibly bearing the very title Mahdi…a prophetic psalm (Psalm 83) provides additional insight into the Mideast picture. Germany (Assyria in Bible prophecy) and perhaps the rest of Europe will be in league in the future with a union of Arab nations…But in the end, this European-Arab alliance will prove short-lived…And the King of the North shall come against him [the King of the South]…Daniel 11:40-41…The Arab-Moslem Confederation will, of course, be thrown into chaotic disarray in the fact of invasion. (Stump K. The Arab World in Prophecy. Plain Truth, December 1979, pp. 11-12).

The above quote clearly shows that the WCG under the late Herbert Armstrong’s leadership taught that there would be a future fulfillment of Daniel 11:40 involving an end-time King of the South. It would seem that the King of the South will employ some type of warfare and terrorism against the descendants of Israel. The Bible specifically warns about “terror” as a curse for the descendants of Jacob (Leviticus 26:16; Jeremiah 15:8) and since terrorism has often been used by Islamists, this may be part of how they will contribute to the destruction of the nation of Israel and the Anglo-descended peoples that Psalm 83 and Daniel 11:39 alludes to. Some Muslims want a leader called the Imam Mahdi, while others call for a Caliph, to lead them and create some type of Islamic empire in the 21st century.

Though not all Muslims expect the Imam Mahdi, many still seem to long for a leader to unify the Arab World. Some Muslims are looking for a political-spiritual leader, sometimes called the Caliph in English, to rise up (Caliph is a shortened version of “Khalifah rasul Allah” meaning “Successor to the Messenger of God”). The title caliph has been given to the head of state in Muslim-governed countries in the past, though the latter ones lacked the power of the earlier ones: The supreme office of caliph, originally elective, became hereditary…Eventually…caliphs became figurehead or “puppet” leaders…Many Arabs…seek to re-create the political and theological unity of the early Islamic caliphate (Stump K. The Arab World in Prophecy. Plain Truth, December 1979, pp. 9-10).

Today this pattern is repeating itself, as a “third wave” of leaders is sweeping across the Middle East. Rejecting both the capitalism of the West and the discredited Marxism of the former Soviet Union, these would-be “third wave” leaders have emphasized a fundamentalist brand of Islam that leaves no room for compromise. Looking back to the glory days of Arab conquest and dominance in the first centuries after Muhammad, they also dream of a pan-Arab union. This will not be a union under a monarch from one of the old Bedouin dynasties, or a secular-educated army officer turned dictator, but rather a New Caliph who will unify the Faithful under the banner of purified Islam. This, they reason, is the only way that Western influence can be expelled from their region, and that Israel can be subjugated

The yearnings across much of the Middle East for a New Saladin—one who will restore Arab glory by conquering the Jews and expelling Western influence—were foreseen by Bible prophecy. In Daniel 11:40, we read of a future “King of the South” who will ultimately “push at” a coming European superpower at the time of the end. This individual, called in Bible prophecy the King of the South because his center of power is south of Jerusalem, will undoubtedly be a charismatic person who will whip up much of the Muslim Middle East into a frenzy against Israel and Europe. (Ogwyn J. Conflict Over the “City of Peace”. Tomorrow’s World magazine, March-April 2002).

In the Plain Truth of December 1980–the year that HWA often claimed he now had the Church back on track–another article states: Bible prophecy reveals the coming emergence of an Arab-Moslem confederation in the Middle East. It is referred to in prophecy as the ‘King of the South’ (Daniel 11:40). This confederation will play a crucial role in end-time events (Stump, K. Plain Truth. December 1980, p.26).

A related Plain Truth article states: Bible prophecy reveals the coming emergence of an Arab-Moslem confederation in the Middle East. It is referred to in prophecy as “the King of the South” (Dan. 11:40). This confederation will play a crucial role in end-time events. (Stump K. Seeing the World Through Islamic Eyes. Plain Truth, June 1983, p.44).

CoG writer also presents Damascus and Syria in prophecy Will Bashar Assad hold power as he has it? Does the Bible show that Damascus, the capital of Syria, will be destroyed? What will happen to Syria? Will the Syrians support the final King of the South that the Bible tells will rise up? Which scriptures discuss the rise and fall of an Arabic confederation? Does Islamic prophecy predict the destruction of Syria. This is a YouTube video.

What should you know About Turkey in prophecy Do you know the Turkish people descended from? Did the Ottoman Empire possibly fulfill a promise in Genesis? Will Turkey support the European King of the North or Arabic King of the South? Will it betray one of them? Will Turkey be involved in the encouraging the destruction of Israel? Is Turkey going to become Catholic? Is Turkey mentioned in Psalm 83, Daniel 11, and elsewhere in the Bible? This video provides answers.

Prophecy Update relates Egyptian, Israeli military alerts prompted by Islamist mutiny threat from Sinai. A new Egyptian crisis arena: the Egyptian and Israeli armies Friday, July 5, raised their alert levels on either side of the Sinai border after the Muslim Brotherhood declared Sinai its center of revolt and revenge for the Egyptian army’s ouster of Mohamed Morsi as president Wednesday, July 3. Following a multiple Islamist attack in northern Sinai, the Egyptian army went on high alert in the Suez and North Sinai provinces. The Sinai border crossings to the Gaza Strip and Israel were closed. The army spokesman in Cairo denied declaring an emergency – only a heightened alert.

Egyptian forces also shut down all three underground passages running from the mainland to Sinai under the Suez Canal. Egypt’s Third Army was deployed to secure them, under the command of Maj. Gen. Osama Askar.

Further measures imposed for guarding Suez Canal cargo and oil shipping against possible rocket fire from central Sinai included the stationing along its banks of Patriot anti-missile batteries and anti-air weapons systems

Around one-third of the world’s oil supplies from the Persian Gulf pass through the Suez Canal on their way to the Mediterranean and Europe.

These emergency measures were clamped down Friday after the Muslim Brotherhood established a Sinai “War Council” to mount a rebellion against the army in collaboration with the radical Palestinian Hamas and Jihad Islami as well as the al Qaeda-linked Salafist groups in the Gaza Strip and Sinai.

The parties say in a press conference Saturday that what prompted them to form the alliance is the recent political crises in Egypt and the “clear dangers” triggered by the “police [labour] strike… in what seems like a forced summoning of the army” to take power.

The Salafi parties have been mentioned in the news so here is some information about them, they are the arm of the Saudi royals and have contested with the Muslim Brotherhood, who the Saudis fear, for power: Salafi movement – Wikipedia, the free encyclopedia

The Salafi methodology, also known as the Salafist movement, is a movement among Sunni Muslims named by its proponents in reference to the Salaf (“predecessors” or “ancestors”), the earliest Muslims considered to be examples of Islamic practice.[1][2]

The movement is often described as related to, including, or synonymous with Wahhabism, but this is disputed. Many Salafists consider the term Wahhabi derogatory, and object to being called that.[3] At other times, Salafism is deemed as the hybridation between Wahhabism and other movements which have taken place since the 1960s.[4] Salafism has become associated with literalist, strict and puritanical approaches to Islam and, in the West, with the Salafi Jihadis who espouse violent jihad against civilians as a legitimate expression of Islam.[5] However, leading Salafi scholars have condemned attacks on civilians,[6][7][8][9] and salafi who support such attacks remain a minority.[10]

This paragraph is most interesting since it goes totally contrary to US propaganda about how mean Morsi was: Salafi have been notable following insurrections in Egypt, Tunisia and Libya. In the 2011–12 Egypt parliamentary elections, the Islamist Bloc led by Al‑Nour party despite having only “a few months of party politicking experience” managed to received 27.8% of the vote, or 127 of the 498 parliamentary seats contested, to form the second-largest parliamentary bloc.[74] According to Ammar Ali Hassan of al-Ahram, while Salafis and the Muslim Brotherhood agree on many issues such as the need to “Islamise” society and the right to private property restricted by the duty incumbent upon Muslims to give alms, they have clashed over the Brotherhood’s “flexibility” on the issue of whether women and Christians should be entitled to serve in high office, and the brotherhood’s relatively tolerant attitude towards Shia Iran in foreign policy.[75]

Doesn’t fit today’s propaganda storyline, does it? The liberals in Cairo (this is nearly their only base) have this bizarre belief that the fascist military group which serves Egypt’s elite rich, will support the sort of women’s and religious civil rights which Saudi’s rulers forbid. Note that only the Red Sea separates these two countries and the last thing Saudi rulers want is a counter example to their despotism! The riots against Christians were not the Brotherhood but mainly the Saudi-supported Salafists. Ditto, the raping of women all over the place during the demonstrations against Morsi.

The first real shock that hit the relationship between Riyadh and the Brotherhood took place following the Iraqi invasion of Kuwait in 1990. While Saudi Arabia relied on the US to liberate the occupied emirate and to ensure its own security against the threat of Saddam Hussein, the Muslim Brotherhood opposed Western intervention. This position was interpreted as a sign of ingratitude. Following the liberation of Kuwait in 1991, Saudi Arabia witnessed the appearance of the first opposition movement, Al-Sahwa (Awakening), which challenged throughout the 90s the absolute monarchy of Al-Saud and called for political reforms. Some Saudi leaders accused the Brotherhood of being Al-Sahwa’s inspiration.

The second shock, more violent, that hit the relationship between the Brotherhood and Saudi Arabia came following the attacks of 11 September 2001 in the United States. Some 15 of the 19 alleged attackers were Saudis. Part of Saudi’s rulers threw the blame for this “deviation” of some young Saudis on the doctrinal activism advocated by the Muslim Brotherhood, particularly their most famous ideologue, Sayed Qutb, hanged by the Nasser regime in 1966. The Saudi interior minister at the time, and the crown prince from October 2011 until his death on 16 June 2012, Nayef Bin Abdel-Aziz, accused the Muslim Brotherhood in 2002 of being the origin of most problems in the Arab world. This doesn’t mention Atta, the ringleader of the successful 9/11 attacks. He was the son of a top Egyptian Muslim Brotherhood member! The Egyptian people will not be ‘free’ at all, they will be loaded with even heavier chains by the Saudis. The farce of the US media celebrating this as some sort of redemption of the revolution is insane. And worse, the owners of our media know perfectly well.

4) … An inquring mind asks, will there be enough liquid assets, amongst the collateral assets, at banks, to provide credit liquidity to avert a liquidity crisis, and a resulting credit crisis?

Time marches on and with lessons learned harshly comes a fresh resolve to somehow get ahead of whatever might cause the next financial crisis. For all the complacent talk about how the “recovery is on track” and “there has been much economic deleveraging” and “the banks are again well capitalized,” the truth behind the scenes is that central bankers and other economic officials the world over remain, in a word, terrified. Of what, you ask? Of the shadow banking system that, I believe, they still fail to properly understand.

In the present instance, so the thinking behind liquidity regulation goes, prior to 2008 the regulators were overly focused on capital adequacy rather than liquidity and, therefore, missed the vastly expanded role played by securitised collateral in the international shadow banking system. In other words, the regulators now realise, as I was arguing back in the mid-2000s, that the vast growth in shadow banking liquidity placed the stability of the financial system at risk in the event that there was a drop in securitised collateral values.

In 2007, house prices began to decline, taking collateral values with them and sucking much of the additional, collateral-based liquidity right back out of the financial system, unleashing a de facto wave of monetary+credit deflation, resulting in the subsequent financial crisis. But none of this was caused by ‘market failure’, as Governor Stein contends. Rather, there is another, simpler explanation for why banks were insufficiently provisioned against the risk of declining collateral values, yet it is not one that the regulators much like to hear, namely, that their own policies were at fault.

In one of my first Amphora Reports back in 2010 I discussed in detail the modern history of financial crises, beginning with the 1980s and concluding with 2008, …

Notwithstanding this prominent pattern of market-distorting interest-rate manipulation, guarantees, subsidies and occasional bailouts, fostering the growth of reckless lending and other forms of moral hazard, the regulators continue their self-serving search for the ‘silver bullet’ to defend against the next ‘market failure’ which, if diagnosed correctly as I do so above is, in fact, regulatory failure.

Were there no moral hazard of guarantees, explicit or implicit, in the system all these years, the shadow banking system could never have grown into the regulatory nightmare it has now become and liquidity regulation would be a non-issue. Poorly capitalised banks would have failed from time to time but, absent the massive systemic linkages that such guarantees have enabled, encouraged even, these failures would have been contained within a more dispersed and better capitalised system.

As it stands, however, the regulators’ modus operandi remains unchanged. They continue to deal with the unintended consequences of ‘misregulation’ with more misregulation, thereby ensuring that yet more unintended consequences lurk in the future.

Might collateral transormation be the crux of the next crisis? An obvious consequence of such collateral transformation is that it increases rather than decreases the linkages in the financial system and thus in effect replaces firm-specific, idiosyncratic risk with systemic risk, exactly the opposite of what the regulators claim they are trying to do by increasing bank regulatory capital ratios. Liquidity regulation is an attempt to address this accelerating trend and the growing systemic risks it implies.

Those financial institutions engaging in the practice probably don’t see things this way. From the perspective of any one institution swapping collateral in order to meet changing regulatory requirements, they see it as necessary and prudent risk management. But within a closed system, if most actors are behaving in the same way, then the net risk is not, in fact, reduced. The perception that it is, however, can be dangerous and can also contribute to banks unwittingly underprovisioning liquidity and undercapitalizing against risk.

Viewed system-wide, therefore, collateral transformation really just represents a form of financial alchemy rather than financial engineering. It adds no value in aggregate. It might even detract from such value by rendering opaque risks that would otherwise be more immediately apparent. So I do understand the regulators’ concerns with the practice. I don’t, however, subscribe to their proposed self-serving remedies for what they perceive as just another form of market failure.

Already plagued by the ‘Too Big to Fail’ (TBTF) problem back in 2008, the regulators have now succeeded in creating a new, even more dangerous situation I characterise as MAFID, or ‘Mutual Assured Financial Destruction.’ Because all banks are swapping and therefore holding essentially the same collateral, there is now zero diversification or dispersion of financial system risk. It is as if there is one massive global bank with thousands of branches around the world, with one capital base, one liquidity ratio and one risk-management department. If any one branch of this bank fails, the resulting margin call will cascade via collateral transformation through the other branches and into the holding company at the centre, taking down the entire global financial system.

Am I exaggerating here? Well, if Governor Stein and his central banking colleagues in the US, at the BIS and around the world are to be believed, we shouldn’t really worry because, while capital regulation didn’t prevent 2008, liquidity regulation will prevent the scenario described above. All that needs to happen is for the regulators to set the liquidity requirements at the right level and, financial crises will be a thing of the past: never mind that setting interest rates and setting capital requirements didn’t work out so well. Setting liquidity requirements is the silver bullet that will do the trick.

Sarcasm aside, it should be clear that all that is happening here is that the regulators are expanding their role yet again, thereby further shrinking the role that the markets can play in allocating savings, capital and liquidity from where they are relatively inefficiently utilized to where they are relatively more so. This concept of free market allocation of capital is a key characteristic of a theoretical economic system known as ‘capitalism’. But capitalism cannot function properly where capital flows are severely distorted by regulators. Resources will be chronically misallocated, resulting in a low or possibly even negative potential rate of economic growth.

The regulators don’t see it that way of course. Everywhere they look they see market failure. And because Governor Stein and his fellow regulators take this market failure as a given, rather than seeking to understand properly how past regulatory actions have severely distorted perceptions of risk and encouraged moral hazard, they are naturally drawn to regulatory ‘solutions’ that are really just plagiarised copies of an old playbook. What is that definition of insanity again, about doing the same thing over and over but expecting different results?

5) … Some be of pathological altruism and others be of pathological confrontation.

Mike Mish Shedlock relates New York Times op-ed contributors Jennifer Stisa Granick and Christopher Jon Sprigman make the case that the NSA Actions are both illegal and unconstitutional in their article The Criminal NSA.

Mike Mish Shedlock writes Don’t worry it’s only “Alegal“. Inquiring minds just may be interested in the Meaning of Alegal. According to the Urban Dictionary … An unambiguously wrong, disruptive and often deliberately committed act for which there is not yet a specific law making that act expressly illegal. (See Extralegal) Financial and white collar crimes, such as offshore banking, misrepresenting the value of investments and temporarily selling ‘junk’ assets to create cashflow are prime examples of “a”legal activities. Alegality is a corollary of the distinction between amoral and imoral reasoning as applied to legality.

Broker#1: We’re putting together a portfolio of failing investments so we can sell it investors then short against it and make a killing … Broker#2: Isn’t that illegal? … Broker#1: Nope, just alegal… Now lets get some lattes.

Mish Definition of Alegal … A blatantly illegal action conducted with immunity, because perpetraitors understand they will never be prosecuted or held accountable in any way

7) … Banks of all types will be integrated with the government and be known as the “Gov Banks”.

“This framework requires banking organizations to hold more and higher quality capital, which acts as a financial cushion to absorb losses, while reducing the incentive for firms to take excessive risks,” Chairman Ben Bernanke said. “With these revisions to our capital rules, banking organizations will be better able to withstand periods of financial stress, thus contributing to the overall health of the U.S. economy.”

Translation: The rules will require banks to purchase more government securities, rather than make loans to the private sector. The nudge is in.

In a May 1 report, Treasury Borrowing Advisory Committee said banks, over time, will need to buy as much as $5.7 trillion in “safe” assets including government bonds by 2020 to comply with the

2010 Dodd-Frank Act in the U.S., and capital standards set by the Bank for International Settlements in Basel, Switzerlandt.

The Federal Reserve’s strong capital positions framework ruling of July 2, 2013, is diktat in its rawest form. The US central bank ruling for capital adequacy consisting of Federal Government Debt, SHY, IEF, TLT, is a form of diktat money, that replaces fiat money. Furthermore, today’s diktat, evidences an integration between community banks and government, where community banks will be known as “Government Banks” or “Gov Banks” for short. The banks will be part and parcel of government; their purpose will not be lending as it has been known, but rather check cashing.

The jump on the Interest Rate on the US Ten Year Note, ^TNX, to 2.01% on May 24, 2013, constituted an “extinction event”, that is a cataclysm, which literally destroyed the investment choice offered by bankers as the way of life, and terminated the paradigm of Liberalism. Jesus Christ is operating at the helm of the Economy of God, Ephesians 1:10, and has pivoting the world into the paradigm of Authoritarianism, where the diktat of nannycrats is the now the way of life. Fiat money died, and diktat money has been coming to life.

Please consider the corollaries from the Dispensation Economics Manifest … http://theyenguy.wordpress.com/about/ … that flows from the biblical revelation that Jesus Christ, is operating as steward in dispensation, that is the household management plan of God to both complete and fulfill all things in every age, epoch, era and time period.

Liberalism’s Banker regime (which was based upon democratic nation states) had a policy of investment choice. The dynamo was one monetary interventionism, consisting of POMO, Quantitative Easing, Central Bank Interest Rate Reductions, Kuroda Abenomics, and Global ZIRP, which powered up corporate profit and global growth … and came with credit schemes, such as free trade agreements, financial deregulation, leveraged buyouts, nation investment, currency carry trade investing, securitization of debt, financialization of stocks and ETFs, and dollarization … where Milton Friedman’s Free To Choose concept of floating currencies and abandonment of the gold standard, established the rule underlying all investing, providing for the fiat money system.

Authoritarianism’s Beast regime (is based upon statist regional governance) has a policy of diktat. The dynamo is one totalitarian collectivism consisting of public private partnerships for oversight of the factors of production, banking, commerce and trade, which powers up regional security, stability and sustainability … and comes with debt servitude schemes, such as regional framework agreements, bank deposits bailins, new taxes, privatizations, capital controls, central bank rulings for capital adequacy consisting of Federal Government debt, and austerity measures … where Nannycrats establish the rule underlying all diktat, providing for the diktat money system.

Despite this week’s trade lower in Gold, $GOLD, to $1,211, please consider that possession of gold bullion and the mandate of diktat are the only two forms of sovereign wealth in the age of diktat.

8) … Can legislation mandate or foster virtuous conduct and even a virtuous character?

Dr. Worden writes China: Mandating the virtue of filial piety by law The founders of the United States, most notably Thomas Jefferson, John Adams, and Ben Franklin, held that for a republic to long endure, its citizenry must be virtuous and of a minimum education. Public education would be established, such that the common man could render a reasoned judgment at the ballot box. The dictum that the popular sovereign (i.e., the electorate) should be broadly educated resulted in law and medical schools in the U.S. requiring entering students to have a bachelor degree in another school before beginning the bachelor’s degree in the professional school. In short, public policy is an effective means of providing a people with the opportunity to gain an education, which at least in theory enhances the wisdom of a self-governing people.

Virtue is another story. Law seems ill-equipped to form a virtuous people. It is one thing to outlaw vice in its outward conduct; how can legislation instill virtue within a soul? Mandating virtuous conduct, such as in Massachusetts’ “Good Samaritan” law, may be possible where the conduct is in public and thus readily enforceable. Virtue within the home is far more difficult for the law to reach and thus foster. Even vice behind closed doors, such as incest as well as physical and emotional abuse more generally, is difficult for police to catch. To an extent, property rights enable such vice and allow people the option of not being virtuous in a family context. Yet in countries in which an authoritarian state trumps even property rights, the question becomes whether legislation is the sort of thing that can foster or mandate virtuous conduct and even a virtuous character.[i]

On July 1, 2013, the Government of China passed the Protection of the Rights and Interests of Elderly People law.

In contrast, virtue interacts with the idiosyncratic nature of the human psyche to form a unique moral character, which the person then applied to particular social situations. Filial piety in practice might mean one thing to you and something else to me even if we agree on the internal essence of the virtue. Furthermore, how we choose to express the virtue externally involves our own particular histories and situations. You might be obligated morally to visit your parents, while I face a psychological and moral obligation to avoid mine. Law is not such a sufficiently fine-tuned instrument to accommodate both of us, even as we share the same virtue.

Given the nature of human nature, law is both necessary and limited in its capacity. Even in the case of an autocratic state such as in China, the law can only do so much in touching a citizen’s interior life—the life of the soul. Instead of having issued particular requirements to foster the virtue of filial piety in society, the Chinese government could alternatively have put resources into helping the Chinese adults having living parents assess how to apply the virtue to their particular situations rather than determine one size to fit all.

9) … Trains carrrying rail cars full of oil to be sent through Bellingham Washinton for refining, and then the oil is exported to Asia.

The train “somehow got released,” and had no conductor on board, according to the rail company. The convoy of crude oil left the station of its own accord during a shift change in Nantes, west of the affected region. “We’re not sure what happened, but the engineer did everything by the book. He had parked the train and was waiting for his relief,” Montreal, Maine and Atlantic Railway, Inc Vice President Joseph McGonigle said on Saturday.

John Stark of the Bellingham Herald reports Whatcom refineries gear up for crude oil via rail. BP Cherry Point refinery is building a huge rail loop south of Grandview Road to handle crude oil shipments from North Dakota, and the Phillips 66 Ferndale refinery hopes to start building its own crude oil rail terminal later this year.

In regulatory filings with Whatcom County, the oil companies say the projects will help them diversify their sources of supply. Phillips notes that Alaskan oil production is declining, and there are no pipelines capable of bringing large volumes of North American crude to this area.

BP’s project includes a 10,200-foot-long rail loop – almost two miles. BP told county regulators the refinery expects to handle a maximum of one trainload of crude oil per day. In an email, BP spokesman Bill Kidd said the project would be complete late 2013 or early 2014.BP once planned to build a large natural gas-fired generating plant on the same site, and obtained permits to build it. Corporate officials eventually decided not to proceed with that project, but some of the environmental groundwork done for the generating plant helped to clear the way for the rail loop: New wetlands had been installed north of Grandview Road to make up for wetlands that would have been filled for the generating plant, so no new wetlands had to be created for the rail loop.

The Phillips 66 project would be located north of Slater Road and west of Lake Terrell Road, at the end of the existing BNSF Railway Co. spur that serves the two Whatcom County refineries as well as the Alcoa Intalco Works aluminum smelter. Among other things, Phillips 66 plans to build a 7,000-foot siding to park empty oil trains waiting to be dispatched back to the oilfields.

Phillips reported to Whatcom County that it expects to handle one oil train every two days, on average.

The trains are made up of 100 or more tank cars, Phillips reports, with total train lengths of more than one mile. Those trains will travel to and from the refineries on the BNSF line through Bellingham and Ferndale.

Phillips spokesman Jeff Callender said his company is still completing the permitting process with local, state and federal agencies, but hopes to begin construction by the end of this summer. Once the rail terminal is done, Phillips could meet as much as 30 percent of its 100,000-barrel per day demand with rail shipments.

That would eliminate the need for one tanker per week on Puget Sound, Callender said.

Frank Holmes, spokesman for Western States Petroleum Association, noted that oil production from Alaska has been the traditional mainstay for Washington refineries, but that production is falling. At its peak, Alaska produced about 2 million barrels a day, but that has declined to about 500,000 barrels a day. At the same time, the use of fracking technology has generated a boom in North Dakota’s Bakken formation, with production there now estimated at 790,000 barrels a day.

To the south, the Tesoro refinery in Anacortes is already taking delivery of Bakken crude, and the Shell refinery in Anacortes has announced plans to do so.

While trainloads of crude oil pose some spill hazards, Holmes observed that every form of oil transport proposes risks. Eric de Place, policy director at Sightline Institute in Seattle, said that is true. “I don’t want to be alarmist, because oil spills happen on vessels and they happen on pipelines also,” de Place said.

But de Place said environmentalists and public officials should pay more attention to the sudden boom in crude oil shipments by rail. In a recent report he authored, de Place said that if all existing and planned petroleum rail terminals were built and operated at full capacity, they would put an estimated 20 mile-long trainloads of crude oil per day on the Northwest’s railway system. De Place argues that regulators should be looking at the combined impact those trains would have.

He is also concerned that Northwest ports could eventually be used to export North Dakota crude that would be carried to the coast by rail. Under current law, U.S. crude oil cannot be exported, but the law could be changed. And current law would not prohibit using U.S. ports to ship out Canadian crude oil that also could be sent south by rail.

“I don’t think people understand that it represents a pretty fundamental transition in the region’s energy economy,” de Place said.

The Bakken oil boom is having other local reverberations: Some Whatcom County people have moved to North Dakota to get their share of the boom.

Kelly Pugh, a Lynden High School graduate, made a living on local construction projects before the real estate boom collapsed. Now he lives in Williston, N.D., making good money working for Baker Hughes Inc., a major oilfield services company. Pugh said he knows a number of Whatcom Countians willing to put up with the long winters and hot, sometimes stormy summers in exchange for a steady income. “I don’t honestly know that anybody wants to be here,” he said. “We’d all rather be home, but we can’t say no to the money.”

10) … With corporations having debt owing to foreigners, a lack of foreign currency exchange imperils the nation of India.

Ashish Kumar writes in India Study Channel The dangerous decline of rupee and the worsening economic crisis. Despite the record weakness of rupee, export has not augmented since last two years. The reason of this is not the worldwide slow down. In fact, the increase in investment cost of production has broken the spine of competition in export. The weak rupee, ICN, inflation and pricey credit have all played together the role in increasing investment cost of production. Even when the rampant burgeoning demand in global market, our country’s exporters are falling behind the nations like Thailand, South Africa, and Indonesia even in traditional areas like gems, clothes, engineering etc. The October of 2012 was very decisive when dollar had started the journey ahead of 53 rupees. By then, the cleft of safe vault of foreign exchange reserve had opened up fully. The difference of deficit of current account touched 6.7 % in proportion to GDP, which was 5.6 % during the crisis of 1991 that should have been 3 % in idea condition. Due to the news circulation of dollar reserve of country left only for a period of 7 month’s import, strong instability in rupee set in because, now the strength of Indian currency is not dependent on export or export or investments but on the incoming and withdrawal of dollar in share market.

Reasons for fall of India’s stock market, INP, and SCIN, Foreign investors had descended down in Indian market with the money that was released in market by the Federal Reserve to deal with depression. Now with the return of growth in America, this flow is certain to stop. Hence, from the fresh hints of Federal Reserve, the financial markets are falling and rupee is going down the pit. Its effects are on every emerging market. However, other countries have sufficient foreign exchange reserve whereas India has this at the minimal mark compared to other equivalent nations. Foreign debt has burgeoned. The monetary reserve is worth paying 78 % debt liability. Fundamental economic indicators are giving off weak signals and over 50 big main companies are burdened with foreign debt that would increase their investment cost and squeeze consumers to make up enhanced cost of their own investments. Therefore, Indian currencies among emerging markets ha fallen steeply biting dust.

It would be better had we learnt to live with the tortures of a weak rupee, because our economy has set out on the circuitous long journey depending on import in company of weak nation’s currency.

11) … Summary financial comment

Jesus Christ, operating at the helm of the Economy of God, Ephesians 1:10, terminated Liberalism, and its Banker regime, by enabling the bond vigilantes to call the Interest Rate on the US Ten Year Note, ^TNX, higher to 2.01%, on May 24, 2013. This “negative key reversal”, that is this “extinction event”, killed the Creature from Jekyll Island, that is the US Fed. God’s Son did what Ron Paul could not do; he ended the US Fed.

And now, continuing on, Jesus Christ buried Liberalism, putting its Milton Freidman Free To Choose Floating Currency System, in the grave, on July 5, 2013, by first enabling the bond traders to call the Interest Rate on the US Ten Year Note, ^TNX, higher to 2.72%; of note, the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, steepend sharply, as is seen in the Steepner ETN, STPP, steepening, better said, blasting vertically higher; and secondly by enabling the currency traders to call the US Dollar, $USD, higher to 84.71, and to sell invididual currencies; those sinking included the Indian Rupe, ICN, -1.2%, Emerging Market currencies, CEW, -1.4%, the Swedish Krona, -FXS, 1.5%, the Euro, FXE, -1.5%, and the British Pound Sterling, FXB -2.4%.

Friday July 5, 2013, was Black Friday for credit, as the bond vigilantes conducted ongoing sluagher in the credit markets. And Friday July 5, 2013, was Black Friday for currencies worldwide as the currency traders continued their successful currency war of competitive currency devaluation on the world central banks.

Marc to Market writes in Zero Hedge The Dollar Index made new three year highs before the weekend and after the employment data (and has been rising from an April 2011 low of 73). Although it is flirting with the top of its Bollinger Band, there is no compelling sign that the move is exhausted. It has rallied over 5% off the low on June 19, when it recorded a key upside reversal. Our next target is the downtrend line drawn off 2009 and 2010 highs and comes in near 86.00. This environment is not good for the dollar-bloc, which had been the market’s darlings for much of the post-Lehman period. Both the Canadian and Australian dollar recorded new lows for the year last week and the adjustment is not over.

Welcome to the mad world of competitive devaluations. Talk that the Fed might be thinking about winding up its QE money printing hardly helps. Higher interest rates would attract even higher inflows into the dollar. Still bond yields have been rising anyway. The bond market is starting to crack up.

For investors fleeing the currencies of depreciating nations this becomes a self-fulfilling prophesy on a mammoth scale. As they shift into the US dollar so the currencies they think are going to fall just have to fall because they are being sold. Besides that is what the central banks running the yen, pound and

euro want anyhow.

Their mad plan is to export their own economic troubles to the United States through currency devaluation and yet at the same time imagine that the US economic recovery will somehow drag the whole world out of its economic depression. No matter that China is also slowing down right now, partly because of its links with the increasingly overvalued US dollar.

How does this situation resolve itself? Badly is the answer. At some point the US bond market, the largest financial market in the world, has to crash under the strain. The Fed has certainly painted itself into a policy corner that requires far more imagination than we can conjure to think of a solution.

Perhaps some of our outstandingly brilliant readers could offer an answer. ArabianMoney can’t solve it, so we think a massive financial crash and rush into precious metals is the final phase of the crisis before a global reset and a new gold-backed currency is issued. That’s a financial crisis much bigger than anything we have seen to date. Politicians and central bankers will really have to get their act together then or we really are all doomed!

I relate that going into July Earnings Season Reporting, World Stocks, VT, Nation Investment, EFA, Small Cap Nation Investment, EFA, Global Industrial Production Investment, FXR, and Sector Investment with those which have seen the least investment derisking, are at great risk for a significant sell off; these include

and Internet Retail, FDN, and its stocks, AMZN, PCLN, and GOOG, these being the short selling opportunity of a lifetime, as the the global credit carry trade is over through finished and done.

Benson te relates Given the Fed’s accommodative policies, a financial asset boom represents symptom an inflationary boom. Such boom appears to have percolated into the real economy which has been reflected via the ongoing recovery in commercial and industrial loans which approaches the 2008 highs [3]. Consumer credit has also zoomed beyond 2008 highs [4]. This means that the pressure for higher has been partly a product of greater demand for credit. But treasury yields have been rising since July 2012. Treasury yields have been rising despite the monetary policies designed to suppress interest rates such as the US Federal Reserve’s unlimited QE in September 2012, Kuroda’s Abenomics in April 2013 and the ECB’s interest rate cut last May.

I comment that the world central banks’ global ZIRP monetary policies have crossed the Rubicon of sound monetary policy have crossed the Rubicon of sound monetary policy and have made “money good” investments bad, first with Emerging Markets, EEM, such as Peru, EPU, Brazil, EWZ, EWZS, and India, INP, SCIN, and then with interest rate sensitive sectors, specifically Utility Stocks, XLU, DBU, Real Estate, IYR, and REITS, RWR.

Benson te continues, The spike in US Treasury yields has broad based implications. Treasury yields, particularly the 10 year note [5], functions as important benchmark which underpins the interest rates of US credit markets such as fixed mortgages and many longer term bonds.

Moreover, sharply higher UST yields will likely reconfigure ‘yield spreads’ drastically on a global scale to correspondingly reflect on the actions of the bond markets of the US and the other major developed economies.

Such adjustments may exert amplified volatilities on many global financial markets including the Philippines.

For instance, soaring US bond yields have already been exerting selling strains on the Philippine bond markets as I have been predicting [8]. Philippine 10 year bond yields [9] jumped 35 bps on Friday or 13 bps from a week ago.

And no matter how local officials earnestly proclaim of their intent or goal to preserve the low interest rate environment [10], a sustained rise in local bond yields will eventually compel policymakers to either fight bond vigilantes with a domestic version of bond buying program which amplifies risks of price inflation (which also implies of eventual higher interest rates), or allow policies to reflect on bond market actions.

Worst, a sustained rise in international bond yields, which reduces interest rate arbitrages or carry trades, may exacerbate foreign fund outflows. Such would prompt domestic central banks of emerging market economies, such as the Philippines, to use foreign currency reserves or Gross International Reserves (GIR) to defend their respective currencies; in the case of Philippines, the Peso.

‘Record’ surpluses may be headed for zero bound or even become a deficit depending on the speed, degree and intensity of the unfolding volatilities in the global bond markets.

Yet any delusion that the yield spreads between US and Philippine bonds should narrow towards parity, which would imply of the equivalence of creditworthiness of the largest economy of the world with that of an emerging market, will be met with harsh reality which a tight money environment will

handily reveal.

The new reality from higher bond yields in developed economies are most likely to get reflected on “yield spreads” relative to emerging markets via a similar rise in yields. Yet many banks and financial institutions around the world are proportionally vulnerable to losses based on variability of interest rate risk exposures particularly via fixed-rate lending funded that are funded by variable-rate deposits. Importantly, the balance sheets of public and private financial institutions are highly vulnerable to heavy losses as bond yields rise.

As the Economist observed [11], The immediate threat to banks is a fall in the market value of assets that banks hold. As yields of government bonds and other fixed-income securities rise, their prices fall. Because the amounts of outstanding debt are so large, the effects can be big. In its latest annual report the Bank for International Settlements, the Basel-based bank for central banks, reckons that a hypothetical three-percentage-point increase in yields across all bond maturities could result in losses to all holders of government bonds equivalent to 15-35% of GDP in countries such as France, Italy, Japan and Britain.

What has been categorized as “risk free” now metastasizes into a potential epicenter of a global crisis.

It would be foolish or naïve to shrug at or dismiss the prospects of losses to the tune of 15-35% of GDP. These are not miniscule figures, and my guess is that they are likely to be conservative as these figures seem focused only on bond market losses.

While a sustained increase in the price of credit should translate to eventually lesser demand for credit, as the cost of capital rises that serves to restrict or limit marginal capital or the viability or profitability of projects, what is more worrisome is that “because the amounts of outstanding debt are so large” or where formerly unprofitable projects became seemingly feasible due high debts acquired from the collective credit easing policies by global central banks, the greater risks would be the torrent of margin calls, redemptions, liquidations, defaults, foreclosures, bankruptcies and debt deflation.

And such losses will apply not only to the private sector but to governments as well.

I pointed out last week of a report indicating that many central banks has been hurriedly offloading “record amount of US debt”. As of April 2013, according to US treasury data [12], total foreign official holders of US Treasury papers, led by China and Japan was $5.671 trillion.

This means that the $5.671 trillion foreign official holders (mostly central banks and sovereign funds) of USTs have already been enduring stiff losses. This is likely to encourage or prompt for more selling in order to stem the hemorrhage. I would suspect that the same forces have played a big role in this week’s UST yield surge.

Additionally, the propensity to defend domestic currencies from the re-pricing of risk assets via dramatic adjustments in yield spreads means that the gargantuan pile up of international reserves are likely to get drained for as long as the rout in the global bond markets continues.

I conclude, that beginning in May 2013, Jesus Christ, as steward, acting in the administration plan of God, for the fullness and completion of every age, dispensed debt deflation to destroy Liberalism’s way of life, by first destroying credit, AGG, and second by destroying Major World Currencies, DBV, as well as Emerging Market Currencies, CEW, terminating peoples trust in the elected officials, and world central bank monetary policies of investment choice and their credit schemes, such as, free trade agreements, financial deregulation, leveraged buyouts, nation investment, currency carry trade investing, securitization of debt, financialization of stocks and ETFs, and Forward Guidance.

from Gordon T. Long and John Rubino. It all comes down to liquidity (and little else).

The liquidity fraud is well advanced and likely will continue. This worldwide Ponzi scheme, engineered by governments, provides massive risks and opportunities. For those who don’t understand what is occurring, there is much to be gained from this presentation.

Mr. Rubino describes the problem the Fed’s liquidity has created. Bubbles are re-inflating just as they did prior to the 2008 collapse. Why shouldn’t they? The exact same scam is being perpetrated by government. Another collapse will eventually occur, but its timing and form can only be speculated.

Rubino does a good job of explaining Ludwig von Mises’ ”crack-up boom” which will ultimately destroy fiat currencies. That end leads to extremely high, probably hyper, inflation. The pieces are already in place for this outcome. All that has to happen is for banks to begin normal lending or for people to understand what is happening (or going to happen) to the value of currency. Something will ignite the timber.

Charles Ponzi and Bernie Madoff had to lure marks into their scams. People joined them by choice. The Ponzi scheme operated by governments is mandatory. You are in it whether you want to be or not. You are in it whether you realize it or not. The only issue is to decide is what the best way is to play this Ponzi scheme. Long and Rubino discuss your options.

EU Observer writes Portugal and Greece highlight eurozone fragility. Soon out of the PIGS, that is Portugal, Italy, Greece, and Spain, banking and nation state insolvency, Jesus Christ is going to cause a stroke to one of mankind’s seven institutions, specifically, the head of Finance, Commerce, and Trade. This is known as Financial Apocalypse, that is a global credit bust and financial system breakdown, as foretold by John the Revelator in Revelation 13:3-4. Yet surprisingly, economic capability will recover, this will come through Regionalism, replacing Crony Capitalism, European Socialism, and Greek Socialism, as well as Russian Communism and Chinese Communism, as leaders meet in summits to renounce national sovereignty, and announce pooled sovereignty, this being seen in bible prophecy of Revelation 13:1-4.

Monetization of debt, was a factor in stimulating global economic growth; now with the world central banks unable to monetize debt, the large sovereign debt loads, seen in the chart of World Treasuries, BWX, is no longer sustainable. And with increasing inability to sell debt, fiscal spending will be nipped in the bud, especially for local municipalities, MUB. The very nature of governance will change over night.

With Liberalism, both terminated and buried, people will come to trust in Authoritarianism’s regional governance, and economic policies of diktat and their debt servitude schemes, such as, regional framework agreements, bank deposits bailins, new taxes, privatizations, capital controls, and austerity measures.

Libertarians and Austrian Economists abhorred Liberalism’s Interventionism; they will abhorre even more Authoritarianism’s Regionalism.

With the rise in the Interest Rate On The US Ten Year Treasury Note …. Democratic nation state governance and its monetary policy of stimulus and easing is failing … In God’s Economy, Ephesians, 1:10, Daniel 2:25, Revelation 13:1-4, new regional governance and its economic policy of diktat as well as schemes of debt servitude are rising to rule mankind

1A) …The jump in the Interest Rate on the US Ten Year Note to 2.01% on May 24, 2013, constituted an “extinction event”, terminating nation state governance as well as investment choice. The rise in the Interest Rate on the US Government Note, ^TNX, has been so fast, and the steepening of the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, has been so vertical, that credit and money literally died instantaneously. Fiat money is now longer trustworthy. People will increasing be placing their confidence in diktat money.

Specifically stated, the jump on the Interest Rate on the US Ten Year Note to 2.01% on May 24, 2013, constituted an “extinction event”, that is a cataclysm, which literally destroyed the investment choice offered by bankers as the way of life, and terminated the paradigm of Liberalism. Jesus Christ is operating at the helm of the Economy of God, Ephesians 1:10, and has pivoting the world into Authoritarianism, where the diktat of nannycrats is the way of life. Fiat money died, and diktat money has been coming to life.

The world has pivoted from inflationism to destructionism, as Jesus Christ has now fully unleashed the Four Horsemen of the Apocalypse presented in Revelation 6:1-8, who will within ten years totally terminate all existing economic and political life as it currently is known, as the Rider on the White Horse is transferring sovereignty from democratic nation states to regional governance, the Rider on the Red Horse is increasing violence, the Rider on the Black Horse is increasing famine and economic death, and the Rider on the Pale Green Horse is increasing chaos. As a result, people no longer exist as residents of nation states, but rather as debt serfs under the authority of regional governance, totalitarian collectivism, debt servitude and austerity, as the Beast Regime of Revelation 13:1-4, rises in power to replace the Banker Regime.

I am not being a date setter, but believe that within fourteen years, the world will see the Advent of Jesus Christ, which will a global ecological cataclysm, which will end all existing physical and plant life processes on planet earth, as Jesus Christ returns to set up His Millennial Kingdom, where he reigns globally in glory, peace, and abundance, for a thousand years, from His Temple in Jerusalem, Revelation 20:1-6.

Libealism’s monetary policies of stimulus and easing were Banker regime schemes of the bygone era of inflationism. Nick Beams writes in WSWS Share selloff points to new crisis. Since the global financial crisis erupted in 2008, central banks around the world, with the US Fed leading the way, are estimated to have shovelled at least $10 trillion into financial markets. The initial assistance took the form of bailouts. Now it is being delivered in the form of quantitative easing, in which hundreds of billions of dollars at ultra-cheap rates is made available to banks and finance houses through central bank purchases of bonds. The official rationale for this policy is that purchasing bonds and driving down the yields on the safest financial assets will eventually lead to greater risk-taking by investors, including the injection of money into the real economy. That has not taken place. Rather, quantitative easing has promoted unprecedented financial speculation, leading to a situation in which share markets have risen sharply while the real economy has either grown very slowly, stagnated or contracted.

In contrast to Liberalism’s monetary policies, Authoritarianism’s policies of economic regional governance are the Beast’s regime schemes of today’s era of destructionism.

With that as a premise, there is an ever increasing integration of banks, government, industry, commerce and trade, establishing statist private partnerships in new governance, which will be working in mandates of nannycrats for regional security, stability and sustainability.

In the North American continent, governance, providing economic policy of diktat, will be called the North American Union, that is the NAU, or what I call CanMexAmerica, that being the amalgamation of Canada, Mexico, and the United States of America.

In Europe, governance will be what some call the EU Superstate, or what Angela Merkel has called the New Europe, or what Robert Wenzel of Economic Policy Journal once termed the One Euro Government.

The Economy of God, Ephesians 1:10, is powered by the many grand economic promises of God. The Apostle John presents God’s promised dynamo of regionalism, which replaces crony capitalism, European Socialsm and Greek Socialism, in Revelation 17:12.; Jesus Christ, God’s agent of economy, is bringing forth ten regional kingdoms: “The ten horns of the beast are ten kings who have not yet risen to power. They will be appointed to their kingdoms for one brief moment to reign with the beast.”

1B) … Greece is the beachead for the rise of the Beast Regime of Revelation 13:1-4. European Countries have participated in US Dollar Hegemony throughout the world, such as Iraq, Libya, Mali, and now in Jordan. Such coordination of power between the EU and the US, has been the fateful working of Bible Prophecy of Daniel 2:25-45.

God’s will for mankind is to experience Empire. God promised a succession of empires which is seen in the Statue of Empire dream given to King Nebuchadnezzar in Daniel 2:25-45, where two kingdoms of iron rule will fall from preeminence, and a ten toed kingdom of regional governance will form to rule mankind, with toes of iron diktat and clay democracy.

This global system of regionalism has replace the interventionism of the two iron legs seen in the Statue, where the first iron leg was the British Empire, and the second iron leg is/was the US Dollar Hegemonic Empire, that commenced with the establishment of the US Fed in 1910 to 1913.

The very linchpin in the Economy of God, Ephesians, 1:10, is the nation of Greece, GREK, as the sovereign Lord God, has designed it and a collection of Mediterranean Sea states, known as the PIGS, for their profligacy, to be the beachhead for the rise of the Beast Regime of Revelation 13:1-4.

And FT reports IMF to suspend aid payments to Greece unless bailout hole plugged. And Robert Stevens of WSWS reports New Democracy and PASOK form new crisis-ridden government in Greece. A crisis-ridden Greek government, composed of New Democracy and PASOK, announced a new cabinet following the resignation of the Democratic Left from the coalition. PASOK, which implemented the first raft of austerity measures after taking power in October 2009, was almost wiped out as a political force in the last elections and is now polling at 6.5 percent in opinion polls. However, it will play a much more leading role than previously and acquire key ministerial positions for the first time in this coalition government. PASOK party leader Evangelos Venizelos becomes the new deputy prime minister, a position he held from June 2011 to March 2012. He will also be the foreign minister. PASOK’s Michalis Chrysochoidis becomes transport minister, while Yiannis Maniatis takes over as environment minister. The positions of administrative reform minister and health minister are taken by Kyriakos Mitsotakis and Adonis Georgiadis, both members of ND. Georgiadis was a former member of the far-right LAOS party who was expelled last year and defected to ND, after voting for the second austerity package in defiance of his party’s line. He recently downplayed the emergence of the fascist Golden Dawn, saying that “in the crisis some people become a little bit extremist.” The cabinet reshuffle also brings ND and PASOK, the two main parties of big business, closer. Venizelos commented, “there is no ground in our country anymore for small, party or personal options,” adding that “National interest comes before every party objective.” In nine ministries, ND and PASOK officials will work together to impose further austerity. Pantelis Kapsis, a former government spokesman under the technocratic government of Lucas Papademos (2011-2012), is to run a new ministry specifically charged with dissolving ERT and carrying out massive job losses.

The government is tasked with carrying out further attacks demanded by the troika (European Union, International Monetary Fund and European Central Bank), which will return to Athens next week to review the implementation of austerity policies. Mitsotakis’s first job is to confirm to the troika that 2,000 public sector sackings are in place, as well as moving 12,500 civil servants into a labour mobility scheme over the next few weeks. Without these measures, the troika will withhold the release of the next €8.1 billion tranche of the total loan agreement. Following the first cabinet meeting, Samaras said that accelerating the troika programme was now “more crucial than ever.” Referring to the ERT crisis and the resignation of DIMAR, Stournaras told reporters, “We have to make up for lost time.”

The Greek government is now led by the very parties of big business that were principally responsible for plunging millions of people into poverty, in the process losing the support of the majority of Greeks. In the last election, PASOK and ND were only able to win the support of 40 percent of those who voted.

Despite DIMAR’s departure, the government can still count on the party’s support as it forces through deeper austerity. On Tuesday, party leader Kouvelis said the “Democratic Left…will continue to support the European course of the country and the need to continue reforms in order for Greece to overcome the deep crisis.” Thus DIMAR will continue to play its role as a critical “left” prop of the government. It began life as a right-wing split off from Syriza, the main pseudo-left opposition party. DIMAR entered the government after winning 14 seats in last year’s election. Last October, Kouvelis made a candid statement about DIMAR’s role, saying that in the face of growing hostility to austerity, “If the country today faces heightened pressure, and we as a leftist party participating in the government receive a portion of this pressure, you can image what would have happened if we had not provided it after the second general elections.”

Syriza, which has served, in its own words, as the “loyal opposition” to the ND/PASOK/DIMAR government, has done nothing to oppose the government. Instead it has positioned itself ever further to the right in recent months, in the hope of joining a future government of “national salvation.”

Syriza was lauded in an op-ed piece June 23 in the New York Times, headed, “Only Syriza Can Save Greece” written by economists James K. Galbraith and Yanis Varoufakis.

The authors argued that the crisis over ERT could “take down the Greek government and bring the left-wing opposition to power.” However, they said, “This wouldn’t be a bad thing for Europe or the United States.” They wrote that if Syriza leader Alexis Tsipras becomes the next prime minister, “nothing vital would change for the United States. Syriza doesn’t intend to leave NATO or close American military bases.” The coalition government has routinely used the full force of the state to impose austerity, including breaking up workers’ strikes with riot police. The government is now utilising the Council of State’s order to reopen ERT as the means of removing the workers who have occupied its Athens headquarters. The aim is to establish a new broadcaster employing just 1,000 workers, about a third of the current workforce.

On June 21, the Finance Ministry demanded that the workers “evacuate the premises…to allow for the unhindered and immediate implementation of the Council of State’s decision.” In response, a statement from the ERT workers read, “We shall not stop the struggle unless all of ERT opens as if it did not close for even a day, without any layoffs, without the circumvention of labour rights.” It added, “Come and get us. The orders for the evacuation of the broadcaster building by those who are acting illegally are violating every meaning of constitutional law, who are afraid of democracy, who are afraid of legality, it is force for us to give up. It is force to bring us to our knees. It is force to intimidate us.” While the workers are fighting defiantly to defend their jobs and livelihoods, the trade unions are once again ready to work with the government in pushing through the required austerity. Panagiotis Kalfagiannis, the leader of the broadcast workers’ union Pospert, supported the position of DIMAR and PASOK saying, “If the government wants to restructure ERT we agree. We want restructuring. Not a padlocked ERT.”

It is clearly evident that during the week ending June 22, 2013, God’s word of prophecy of Revelation 13:1-4, is being fulfilled, as the political governance and economic viability of Greece has collapsed.

Greece is a failed democratic nation state and has no national sovereignty to obtain seigniorage for its fiscal needs; it is a beggar nation receiving seigniorage aid from northern EU lords. It is a client state of Eurozone regional governance headed by nannycrats in the Brussels and Berlin. Those living in Greece are debt serfs, living in Euro debt land.

AP reports Greece vows faster reforms after political crisis. Greek Prime Minister Antonis Samaras promised Tuesday to speed up austerity reforms a day after being forced to reshuffle his cabinet due to a political crisis triggered by the closure of state broadcaster ERT. Samaras’ year-old coalition government narrowly avoided collapse after he ordered the sudden closure of ERT on June 11, firing all 2,656 employees. Greece has promised to axe 15,000 public sector jobs by the end of next year as part of cuts demanded by bailout creditors, the IMF, and other euro countries. Apart from the ERT crisis, Samaras is faced with a host of acute problems including shortages in health care and staggering unemployment, which has topped 27 percent. Socialist party leader Evangelos Venizelos, who led tough financial negotiations with Greece’s creditors during his term as finance minister in 2011 but who has seen his party’s popularity plummet, was named deputy prime minister and foreign minister. New ministers were also appointed for the posts of justice, administrative reform, transport and defense, among others, while Finance Minister Yannis Stournaras remained in the position.

Credit was a way of life under Liberalism, but now as is seen in the above AP report, under Authoritarianism, debt servitude is the way of life.

According to God’s Providence, Greece is rapidly leading the way forward in regionalization, where a EU Federal Superstate will be the example and standard for regional governance, totalitarian collectivism, and debt servitude.

EU ‘competitiveness’ is rapidly privatising public services and downgrading the democratic rights of citizens, argues Martin Konecny a researcher at the Corporate Europe Observatory campaign group, who relates in Worthy News, Authoritarian EU’ privatising states and attacking democracy. The June European council will see further debates on Europe’s competitiveness. Prominent among the different proposals is the idea of a so -called competitiveness pact. The plan of the European Commission, big business and of the German government in particular is to establish a set of ‘contracts’ for member states that will impel them to weaken labour laws, and to implement business-friendly legislation to promote competitiveness.

With support and encouragement from the business world, Merkel recently issued a joint statement together with Hollande where they set the timeframe for the final design of the competitiveness pact for the end of this year. But why is it that political and economic elites are pushing for such a deal? A political programme to undermine democracy in a very serious way, even while the formal institutions stay intact. To force every member state into contracts with the commission in such important policy areas as the labour market, in reality means to extend the kind of rule-by-Troika from the crisis-hit south to the rest of Europe. The undemocratic commission, or more precisely its neoliberal vanguard represented by Oli Rehn and his DG-ECFIN, (the Eurozone Finance Ministers) will decide, together with national executives, on the political and economic course of each country.

National parliaments will be sidelined and reduced to the function of rubber stamp legitimising, not coincidentally, a word used more and more often to depict the future role of national parliaments in debates at the European Council. The European competitiveness agenda has become a key tool to undermine democracy. Competitiveness becomes a value in itself for which we have to sacrifice basic democratic rights if, as is the commission tells us, we ever want to see jobs again.

The question of being able to democratically decide what kind of society we want to live in vanishes while the technocratic, in reality, highly political, rule of competitiveness takes its place. Instead of politicians, citizens are degraded to shareholders who can elect the best management of the competitiveness agenda decided on the European level. It seems that to political and economic elites, the main obstacle to the competitiveness agenda is increasingly seen as democracy itself.

1C) … Democratic nation state governance and its monetary policy of stimulus and quantative easing is failing … new regional governance and statist economic policies to rule mankind. Demcratic governance no more! New governance is coming in the form of regional governance. First, to provide the new policy of diktat and secondly to provide new debt servitude schemes, such as where the Fed encourages banks to place their resources into excesss reserves at the Fed., and where the Fed contracts with property management firms to actively manage and oversee the Fed’s mortgage backed bonds, MBB, by strong-arming the debtors to make payment on the loans.

Beginning in 1931, with the rise of the Creature from Jekyll Island, that is the US Federal Reserve, society was governed by the policy of investment choice and credit schemes. But beginning in May 2013, with the rise in the Interest Rate on the US Ten Year Note, society is increasingly governed by the policy of diktat and schemes of debt servitude..

Please consider the severity of money breakdown that occurred in May 2013: fiat money died. Just like in a hard freeze, where a plant’s life element perishes with a quick and hard snap, so in financial life, the money’s life element has perished by a sharp rise in the Interest Rate on the US Ten Year Note, ^TNX, and has perished by a vertical rise in the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX. as is seen in the Steepner ETF, STPP, steepening vertically.

The element of financial life, that being credit, has perished. With Liberalism’s financial life element of credit dead, Authoritarianism’s life element of diktat is rising to rule mankind.

What Doug Noland terms the global government finance bubble, has popped, it has been this bubble, that has underwritten, and swelled financial asset bubbles worldwide. This popping of bubbles, is seen in the ongoing Yahoo Finance chart of closed end funds AWP, EIM, PFL, PTY, RCS and CSQ, where the most interest rate sensitive bubble has suffered the greatest explosion. When fiat money died, it exploded the most interest reate sensitive asset classes with the greatest gusto.

Please comprehend the desperate nature of financial system death that is taking place: the balance sheet of the US Federal Reserve is been stuffed with US Treasuries, TLT, and Mortgage Backed Bonds, MBB, and is largely based upon the most toxic of debt, that is the “assets” taken in under QE1, these are largely illiquid debts like those traded in Fidelity Mutual Fund FAGIX.

As opposed to the previous rounds of central bank actions featuring Global ZIRP, the next round of central bank actions will be something entirely new. Look for things such as capital controls, and central banks working together in un-dollar regional currency initiatives, such as regional commerce trading platforms, like that of the Hangzhou-based company Alibaba Group. Thor’s Hammer writes in Naked Capitalism “China is forming alliances, engaging in non-dollar denominated energy trade arrangements, and actively working to replace the US dollar as the world reserve currency.” And Thor’s Hammer goes on to relate “When the US loses its reserve currency status that will signal the end of its reign as the world’s only great power. The USA is dependent upon its ability to print dollars to sustain its worldwide imperial military system.”

Global bond markets determine the fate of equity markets. The principle of debt deflation presents falling bond prices, which then cause currency sell-offs, and then stimulate derisking out of nation investment, and in particular financial institutions. This has been the case in the Emerging Markets, EEM, where Emerging Market Bonds, EMB, have plummeted on the sharp rise in the Interest Rate on the 10 Year Note, ^TNX, and then Emerging Market Currencies, CEW, have given way, and then, Nation Investment, EFA, in particular the banks of the countries under stress. A case in point is Brazil, where the Brazilian Real BZF, has fallen, driving Brazil, EWZ, EWZS, and its Banks, BRAF, lower, as is seen in the ongoing Yahoo Finance Chart of EFA, EWZ, RSX, INP, and YAO. Business Insider reports The Brazilian bond market massacre in one huge slide.

Mike Mish Shedlock writes A global currency crisis awaits. Just like Brazil defending the real, India now feels compelled to defend the rupee. Good luck with that idea if capital flight takes off in a major way (and I suspect it will). India does have currency reserves, but those can vanish in a hurry if things get out of hand. And if India does use currency reserves to defend the rupee, I rather doubt the India bond markets will take all that kindly to it. Thus defending the rupee against further declines is easier said than done if the markets have indeed soured on the country, and that is precisely how it looks now. A global currency crisis awaits. I do not know what country triggers first. It could easily be Japan, China, Brazil, India, Australia, Canada, the UK, or any of many countries in the eurozone (as well as numerous countries not on anyone’s radar). This sad state of affairs is courtesy of mad central bank monetary policies coupled with inane can-kicking fiscal policies everywhere you look.

2) … Financial trading activity of week

2A) … Monday June 24, 2013

Robert Wenzel reports Bank Of China declares moratorium on transfers … Via Google translation, Customer service said, now silver futures transfer service has been fully suspended, online banking, the counter can not be handled, and now has the background system response, recovery time is not yet known. The ICBC bank system failure comes trouble “money shortage”, inevitably lead to speculation that many people guess the bank is not money. To solve this problem, ICBC relevant person in charge told reporters that morning, business process slow, the analysis on the host software upgrade, emergency treatment, 11:27 various businesses all returned to normal. As for speculation that the crash might be the last two days the inter-bank “money shortage” relevant, ICBC has denied. Shanghai Shenzen CSI 300 Index -6.3% today.

And Clement Tan of Reuters reports China shares suffer worst day in almost four years The CSI300 of the top listings plunged 6.2 percent; the Shanghai Composite Index, dived 5.2 percent as volumes spiked to the highest in about a month. Monday’s losses were their worst since August 31, 2009.

Commentary said the latest spike in money market rates was a result of market distortions caused by widespread speculative trading and shadow financing. The central bank, in its quarterly report on Sunday, pledged to “fine tune” existing “prudent” monetary policy. “I think the market is expecting ‘fine-tuning’ to mean a tightening of liquidity moving forward, especially after the way official media talked about shadow financing over the weekend,” said Cao Xuefeng, Chengdu-based head of research at Huaxi Securities. “People are quite jittery ahead of the first of two (PBOC) open-market operations for the week on Tuesday. In this market environment, it’s tough to call a bottom, fears could spread about funding for companies,” Cao added.

Banks hammered. Monday’s plunge came despite the overnight repo rate, a key measure of funding costs in China’s interbank market, falling by more than two percentage points to 6.64 percent on a weighted-average basis, its lowest since last Tuesday. It had peaked near 12 percent last Thursday.

Among the biggest losers were smaller banks seen as more reliant on short-term interbank funding. The Shanghai financial sub-index skidded 7.3 percent in its worst day since November 2008, during the financial crisis that started that year. Shanghai-listed China Minsheng Bank and Industrial Bank, along with Shenzhen-listed Ping An Bank all plunged by 10 percent. Minsheng’s Hong Kong listing skidded 8 percent in its worst day since October 2011. Minsheng shares, some of the most popular in both markets earlier this year, are now down 40 percent from a peak in January. They are down 19.4 percent on the year, compared to the 22 percent slide for the H-share index. Among the “Big Four” Chinese banks listed in Hong Kong, Agricultural Bank of China (AgBank) (1288.HK) and Industrial Bank of China (ICBC) (1398.HK) had the biggest percentage losses, 2.9 and 3 percent, respectively.

This is a global story, since Treasuries have been everyone’s safe haven of choice for decades. But painful as a 40% haircut for the world’s pension funds might be, it pales next to the impact on growth. US interest rates are, with a few notable exceptions like Japan, the base of the global yield curve. Everything else, being riskier, has to have a higher yield. So a doubling of US rates means a commensurate ratcheting up of everyone else’s rates.

Since equities are valued in part in relation to the yield on available bonds, rising interest rates mean lower stock prices, everywhere. And real estate, which is generally leveraged, has just gotten a lot more expensive (which means the other group obsessively staring at screens these days is the new generation of flippers who recently joined the Southern California and Florida bubbles). This is the nightmare scenario that keeps central bankers and institutional investors up at night because, based on Japan’s experience with hyper-aggressive monetary ease, there might not be a fix. If even easier money is met with dramatically higher bond yields, as in Japan, then there’s nothing left to do but to let the system unravel.

Elaine Meinel Supkis writes Bond markets rocked by panic. The biggest part of the bond market trading is the ETF guys on Wall Street. Exchange traded funds which didn’t exist before 1993 and which is an elemental part of the Derivatives Beast’s operational system for lurching in various directions very suddenly Only authorized participants, which are large broker-dealers that have entered into agreements with the ETF’s distributor, actually buy or sell shares of an ETF directly from or to the ETF, and then only in creation units, which are large blocks of tens of thousands of ETF shares, usually exchanged in-kind with baskets of the underlying securities. Authorized participants may wish to invest in the ETF shares for the long-term, but they usually act as market makers on the open market, using their ability to exchange creation units with their underlying securities to provide liquidity of the ETF shares and help ensure that their intraday market price approximates to the net asset value of the underlying assets.[4] Other investors, such as individuals using a retail broker, trade ETF shares on this secondary market. These authorized creatures are mainly computers, not humans. The humans are lazy bastards. They hire geeky guys to write elaborate programs and then sit back and let the money pour into their bank accounts after firing the geeks.

Credit, that is trust in the ability of the debtor to repay the lender, no longer exists. And as a result investors are rapdily derisking out of finanical stocks, IXG, which in turn destorys nation investment, EFA.

With the seigniorage of democracies destroyed by higher treasury rates, their currencies are plummenting, and their sovereignty is waining. Said another way, failed seigniorage means failed sovereignty.

In apocalyptic vision, the Aposlte John, foretells in Revealtion 13:1-4, that out of a soon coming credit bust, global currency crisis, and world wide stock market meltdown, new sovereignty will emerge, that being the sovereignty of regional governance, as leaders meet in summits and workgoups to renounce national sovereignty, and announce pooled sovereignty.

With ever increasing power, regional nannycrats will rule in statist public private partnerships, mandating debt servitude schemes such as capital controls, new taxes and bank deposit bailins, as the former credit schemes of democratic states featuring financial deregulation, POMO, Quantitative Easing, and dollarization no longer work.

Lyrics Freak provides John The Revelator Lyrics. The Lord’s Apostle John foretold that the diktat money system is rising to replace the fiat money system, where today’s citizens of democratic countries, will be tomorrow’s residents of regional governance. God’s Apocalyptic Word written 2,000 years ago, rings clear in excellent tone today. God is calling, and only the elect understand and value His communication.

Nick Beams of WSWS reports Share selloff points to new crisis. The renewed turmoil on global financial markets underscores the fact that none of the problems that erupted in the 2008 meltdown have been overcome. I comment that the crack up boom that came via Global ZIRP, is over; countries traded lower as follows:

CAF -5.3

IDXJ -5.2

EPHE -4.3 Benton te reports the yields of 10 year Philippine bonds jumped 10 bps from 3.94 to 4.04 today, the same yields soared by 23 bps or 5.71%, details presented in chart from Investing.com and asks Will the BSP begin to raise rates or will they fight the bond vigilantes by conducting the domestic version of QE or do both ala Indonesia? Rioting local bond markets only contradicts the premises of the recent credit upgrades. Will the credit rating agencies the Fitch and the S&P reverse their position soon? As I have been saying, credit rating upgrades signify as the allegorical “kiss of death” or a “curse in disguise”. Oh by the way the crashing Philippine equity markets has been relentless. Today, the Phisix tumbled by another whopping 3.05% (chart from Technistock.com). Interesting times indeed. Nonetheless the gullible and vulnerable public whom has misread, and or has been deceived or brainwashed by what has been promoted and propagandized by the political spectrum and their media accomplices as “strong economic fundamentals” will soon be faced with harsh reality. They will realize that “strong economic fundamentals” is the metaphorical equivalent of the “emperor has no clothes” or a phony statistical economic boom that has been cosmetically spruced and pumped up by easy money policies via credit expansion. At the end of the day the lesson is: social policies that promotes quasi permanent booms eventually morphs into economic/financial busts. This time is no different.

The WSJ reports Bottom is falling out of copper prices. Copper’s world is coming apart. The price has fallen 16% so far this year and is 34% below February 2011′s all-time closing high. This isn’t just a case of slowing economic growth. The global forces propelling the metal’s stunning rise over the past decade are shifting. Copper’s supercycle is entering its downhill run

NORW, -3.6

EWD -3.3

EWO -3.2

EIRL -3.1

EFNL -3.0

EWP -2.1

EWQ -1.8

EWN -1.7

Mike Mish Shedlock writes Yields creep up in Spain, Italy, France (Actual and also relative to Germany). I comment that they be sovereigns no more, as debt deflation comes to the Euro currency nations. As the yields on Eurozone nation sovereign debt rises, nation investment in Germany, EWG, Italy EWI, Spain, EWP, France, EWQ, as well as Austria, EWO, Netherlands, EWN, and Finland, EFNL, tumbles, as is seen in the ongoing Yahoo Finance Chart of EWG, EWI, EWP, EWQ, EWO, EWN, EFNL. It is sovereignty that begets seigniroage, that is moneyness. The loss of seigniorage seen in the EU country ETFs trading lower, communciates a loss of sovereignty.

Sectors traded lower as follows:

COPX -5.2

SIL -4.6

GDX -4.6

KOL -3.9 US steelmaking coal manufactuer, Cliff Natural Resources, CLF, fell sharply as Bloomberg reports Steelmaking coal slides to four year low after Billiton deal. A key contract that determines prices of coal used in the $1.3 trillion market for steel slid to a four-year low amid a global supply glut. The coking-coal benchmark contract for the third quarter was settled at $145 a metric ton in quarterly negotiations between BHP Billiton Ltd., the world’s biggest coking coal exporter, and Nippon Steel & Sumitomo Metal Corp., Doyle Trading Consultants LLC said today in a report. That compares with $172 in the second quarter

CHIM -3.8

CHII, -3.7

PICK -3.5

BJK -3.2

PBD -2.9

REMX -2.0

XOP -1.6

XLI -1.6

Yield bearing sectors traded lower as follows:

DRW -5.6

ROOF -3.3

REM -2.7

DLS -5.1

DGS -3.5

SEA -3.7

DBU -3.0

Commodities traded lower as follows:

DBC -0.4

JJC, -2.2

SLV -2.1

DBB -1.7

GLD -0.9

JJA -0.8

2B) … Tuesday June 25, 2013

Reuters reports Stocks and bonds recover footing as liquidity fears ease. Market Watch reports China’s PBoC pledges to address the cash crunch. And Bloomberg reports PBOC Ling says rise in China money market rates temporary. China will keep money-market rates at a “reasonable” level and seasonal forces that have driven them up will fade, a People’s Bank of China official said. This as The WSJ reports China’s shadow banks fan debt bubble fears. In a 52-story office tower overlooking the leafy streets of this city’s embassy district, some 400 deal makers at Citic Trust Co. arrange financing for property developers, steel mills and other businesses starved for cash and shunned by China’s traditional banks. The lenders at Citic and other institutions that make up China’s “shadow banks” have created the closest thing China has to the culture of Wall Street. They take risks that traditional banks won’t, going so far as to create investment funds for assets like top-shelf liquor and mahogany furniture. Their top executives drive luxury cars and frequent expensive clubs. Now, China’s shadow banks, a mélange of trust companies, insurance firms, leasing companies, pawnbrokers and other informal lenders subject to limited oversight, are at the center of mounting concerns over whether the country’s slowing economy could trigger a debt crisis.

The safe haven in small cap stocks is Regional Banks,.KRE, as the ratio of these to the Russell 2000, KRE:IWM, is at rally highs; and likewise,the safe haven in large cap stocks is the Too Big To Fail Banks, RWW, as the ratio of these to the S&P 500, RWW:SPY, is at its rally high.

In news of regional governance, Reuters Exclusive reports China Mobile, Etisalat weighing bids for PakistanTelco. Pakistan mobile operator Warid Telecom has been put up for sale by its Abu Dhabi owners and is likely to draw interest from China Mobile and Etisalat, sources familiar with the matter said on Tuesday.

Bloomberg reports Berlusconi’s sex conviction raises tension in Letta’s government. Italian Prime Minister Enrico Letta is facing discord among parliamentary supporters after his coalition partner, Silvio Berlusconi, was convicted of paying a minor for sex and sentenced to seven years in prison. The verdict, announced yesterday by Judge Giulia Turri in Milan, was criticized by Deputy Prime Minister Angelino Alfano and Renato Brunetta, chief whip of the second-biggest party in the lower house of parliament. Letta’s own Democratic Party said it would respect the judge’s decision. Berlusconi, a 76-year-old billionaire and former premier, has said he is innocent and remains free as he prepares his appeal

Denver, Boston, Minneapolis, Seattle, and San Francisco are rated the best cities for small business workers.

Denver: The Mile High City tops the list in part because it has a high concentration of smaller employers. About 97 percent of Colorado employers are classified as small businesses, according to CardHub’s study. Denver’s workforce is also growing at the second-fastest rate in the country, and ranks fifth for highest wages for new earners.

Detroit and Riverside are rated the worst cities for small business workers.

Detroit: Bailouts helped prop up the Motor City. But Detroit’s small-business community continues to be hit by one of the lowest number of small businesses per capita-22 among the study’s list of 30 cities. Detroit’s net small-business job growth came in at 27 out of 30; and 26 out of 30 for industry variety.

Riverside: This Southern California community experienced a massive run-up and collapse in housing prices over the past several years. Among the 30 cities CardHub evaluated, Riverside ranked last in terms of number of small businesses per capita, small-business vitality and unemployment rate.

New small-business hires make the most money in Washington, D.C., San Francisco, and New York, where cost of living is high, according to the study. New earners make the least in Riverside, Sacramento, St. Louis-all in the bottom half for cost of living.

The opportunity to make new commerical real estate deals is now greatly diminished as is seen in the ongoing Yahoo Finance Chart of Commercial Office REITS, FNIO, Mortgage REITS, REM, and Small Cap Real Estate, ROOF. Bloomberg reports Wall Street’s $8 billion CMBS in limbo as bulls retreat. Wall Street firms spent the past six months increasing commercial mortgage origination as investors bought the most debt in six years. That’s now backfiring as banks prepare to market $7.5 billion of loans earmarked to be sold as bonds before credit markets took a dive this month. Investors demanded 1.03 percentage point more than the benchmark swap rate to buy new commercial mortgage backed securities tied to shopping malls, skyscrapers, hotels and apartment buildings on June 14, according to data compiled by Bloomberg. That’s up from 72 basis points in February, the narrowest spread since sales revived in 2009, the data show. Lenders’ profits are eroded when values of the securities fall. The CMBS market is poised for its worst month in almost two years after the Federal Reserve signaled it may curb stimulus efforts as the economy shows sign of improvement. That’s complicating efforts by banks to sell new deals and making it more expensive for landlords to refinance loans backed by everything from Manhattan office space to suburban grocery stores.

Ambrose Evans Pritchard reports Italy could need EU rescue within six months, warns Mediobanca. Italy is likely to need an EU rescue within six months as the country slides into deeper economic crisis and a credit crunch spreads to large companies, a top Italian bank has warned privately. Mediobanca, Italy’s second biggest bank, said its “index of solvency risk” for Italy was already flashing warning signs as the worldwide bond rout continued into a second week, pushing up borrowing costs. “Time is running out fast,” said Mediobanca’s top analyst, Antonio Guglielmi, in a confidential client note. “The Italian macro situation has not improved over the last quarter, rather the contrary. Some 160 large corporates in Italy are now in special crisis administration.” The report warned that Italy will “inevitably end up in an EU bail-out request” over the next six months, unless it can count on low borrowing costs and a broader recovery. Emphasising the gravity of the situation, it compared the crisis with when the country was blown out of the Exchange Rate Mechanism in 1992 despite drastic austerity measures.

US steelmaking coal manufactuer, Cliff Natural Resources, CLF, fell sharply as Bloomberg reports Steelmaking coal slides to four year low after Billiton deal. A key contract that determines prices of coal used in the $1.3 trillion market for steel slid to a four-year low amid a global supply glut. The coking-coal benchmark contract for the third quarter was settled at $145 a metric ton in quarterly negotiations between BHP Billiton Ltd., the world’s biggest coking coal exporter, and Nippon Steel & Sumitomo Metal Corp., Doyle Trading Consultants LLC said today in a report. That compares with $172 in the second quarter

Ethics is defined as economic regard for the property and person of another. This morning at 5:00 AM, I came across a woman laying on the apartment lobby floor. So I went over and gently pressed my toe against her calf and she stirred; she spoke coherently, saying she was resting there; so in spiritual economic regard, I told encouraged her to rest. Another person, one of more carnal regard, came along and helped her get up and go down the hall way into her room; and locked her in and left. I do not intervene in the life of others, as whatever economics they have comes from God, and I do not want to and will not be a busy body in another person’s affairs.

2C) … Wednesday June 26, 2013

Both Aggregate Credit, AGG, and World Stocks, VT, rose, vertically, after having fallen vertically.

There is one single force that will prove to be a key obstacle to any real recovery of Phisix: this is if the drubbing of the domestic bond market continues. Today 10 year yields surged by another 11 bps or 2.57% (chart from investing.com). This is the 3rd day for the sharp climb which nears 50 bps.

It would be a mistake for some to think that this represents a sign of “shifting” (from bonds to stocks). There are really no “flows” on the financial markets. For every buyer there is a seller. For every transaction, cash transfers from buyer to the seller in exchange for securities. What drives prices is the aggressiveness of either the buyer or the seller. Today’s actions means that stock market bulls aggressively bid up the stock markets, while bond vigilantes continue to harass the Philippine bond markets regardless of the reasons behind them. Again a sustained rise in yields will eventually force the BSP’s hand to raise rates, as explained yesterday. And higher rates amidst rapidly growing of systemic leverage only increases credit risks. The Dr. Jekyll and Mr Hyde syndrome hasn’t been a Philippine only characteristic. As of this writing Indonesia’s equity bellwether the JCI has been significantly up even as 10 year bond yields today soared by 31 bps or 4.42%

I comment that the Finviz chart of the Philippines, EPHE, shows a vertical rise, after having fallen vertically. We are witnessing a “sew saw” destruction of fiat wealth, credit investments, equity investments and currencies are literally being sawed asunder, as credit, that is trust, dissipates on the rise of the Interest Rate on the US Ten Year Note, ^TNX.

Action Forex shows the chart of the Euro Yen Currency Carry Trade, that is the EUR/JPY, seen also as FXE:FXY, with close at 127.44. The Finviz chart of the Euro, FXE, shows a close lower at 128.86. The Stockcharts.com chart of the US Dollar, $USD, shows a close at 82.85; just above $82.50, its 50 day moving averge. The US Dollar is trading in the middle of a broadening top pattern, which is best seen in the Finviz chart of its 200% ETF, UUP; it’s as Street Authority relates, when you see the broadening top the market wll eventually drop.

In regimes, policies and schemes govern to establish and define life until terminated by an “extinction event”. When a person is born again, he becomes a New Person in Christ, and comes to have life in Christ, which can never be extinguished, yet Christians are nevertheless influenced by “extinction events”, which include the Advent of Christ, as an example, which will terminate the Beasts regime’s rule, as well as terminate all plant and animal life on planet earth, as well as all physical processes, as presently known.

The rise of the Interest Rate on the US Ten Year Note, ^TNX, to 2.01% on May 24, 2013, was an “extinction event” that terminated Liberalism’s age of investment choice and commenced Authoritarianism’s age of diktat. The word economy is defined as the household administration of things physical, spiritual, philosophical, monetary, and political. The Apostle Paul communicates in Ephesians 1:10, that Jesus Christ is at the helm of the Economy of God. He being sovereign in all things, terminated the Banker regime and commenced the Beast regime. God desires that Christ be one’s all inclusive life experience, Colossians 3:11.

The fiat, those of religious and philosophical ideology, pursue will worship, Colossians 2:23, that is they worship their own will, and have identity and experience in the mandates of their ideology. In contrast, the elect, those of God’s choosing, pursue God’s will, and have identity and experience in Christ.

Liberalism’s policies and schemes ended May 24, 2013, and Authoritarianism’s policies and schemes commenced when the Interest Rate on the US Ten Year Note, ^TNX, rose to 2.01%.

Please consider the Dispensation Economics Manifest concept that the Fed is dead; an organism, having no life, that is no vitality; and as such has no authority or power. The US Federal Reserve, and other central banks, and their agents, that is investment institutions, IXG, such as the Too Big To Fail Banks, RWW, BAC, C, Asset Managers, BLK, Investment Bankers, KCE, JPM, Stockbrokers, IAI, TROW, Regional Banks, KRE, GBCI, European Financials, EUFN, SAN, Far East Financials, FEFN, NMR, Emerging Market Financials, EMFN, ITUB, Chinese Financials, CHIX, SHG, are the Banker regime’s monetary institutions, put in the grave by the failure of Credit, AGG, with the bond vigilantes calling the Interest Rate on the 10 Year Note, TNX, higher. to 2.01% on May 24, 2013. These institutions are seen as tombstones in Liberalism’s graveyard, as one looks in one’s rear view mirror. The Fed is as dead as dead can be, terminated by the “extinction event” of the rise in ^TNX.

Now, regional governance institutions, such as the European Finance Ministers, the IMF, and the Troika, are the enlivened monetary authorities of the Beast regime. The “extinction event” of the rise in the Interest Rate on the US Ten Year Note, ^TNX, terminated all of the authority of Liberalism’s policies and schemes, thereby ending Liberalism’s life experience. Now, Authoritarianism’s policies and schemes, have authority, and ever increaing power, providing monetary and political life experience.

Through the Economy of God, that is the household administration of all things, for the completion of every age, epoch, era, and time period, Ephesians 1:10, Jesus Christ, is powering up Authoritarianism’s dynamo of regionalism, which replaces crony capitalism, European Socialism and Greek Socialism, as foretold in Revelation 17:12. He is bring forth ten reigonal kingdoms: “The ten horns of the beast are ten kings who have not yet risen to power. They will be appointed to their kingdoms for one brief moment to reign with the beast.”

Yes, yes, yes, The Fed is dead. Jesus Christ did what Ron Paul could not do, He ended the Fed. He slayed it by turning the bond vigilantes and the currency traders loose on the markets. But wait a New Monster is replacing it. While the Free To Choose Monster is indeed history, the Regional Governance and Totalitarian Collectivism Monster is coming as the North American Union, or what I call Can Mex America, a Continental Behemoth featuring totalitarian collectivism integrating mankind’s seven institutions: 1) Education, 2) Finance, Commerce and Trade, 3) Body Politic, 4) Military, 5) Religion, 6) Media, 7) Science and Technology. Public private partnerships will oversee the factors of production and manage commerce and trade.

Robert Wenzel of Economic Policy Journal writes Crony Rahmaland billionaire Queen joins Obama Cabinet. The Senate has confirmed Chicago-based billionaire Penny Pritzker as new Commerce Secretary. She was an early and important source of money in Obama’s first presidential campaign. Pritzker is also on the Board of Directors of the Council on Foreign Relations. She serves as trustee of Stanford University. She’s an advisory board member of Robert Rubin’s Brookings Institution’s Hamilton Project. This, folks, is a major insider. Forbes lists her wealth at $1.7 billion. Her father co-founded the Hyatt Hotel chain. She apparently is of the view that only little people pay taxes. NyTi: reports: Pritzker’s family is renowned for finding ways to avoid paying taxes on its wealth. The Pritzkers were pioneers in using tax loopholes to shelter their holdings from the Internal Revenue Service. Nothing wrong with tax loopholes. Mises, afterall, pointed out that capitalism breathes through loopholes, but don’t expect Pritzker spending time at Cabinet meetings advocating tax loopholes for “the little people.” The confirmation vote was 97-1, with only Senator Bernie Sanders voting against.

2D) … Thursday June 27, 2013

World Stocks, VT, rose 1.0%, US Stocks VTI, 0.8% and European Stocks VGK, 0.7%, on a rally in the current bear market; sectors rising included,

Under the Euro, Germany, that is the north, exercised ingenuity, discipline, and conservative economics, such as resistance to anticompetitiveness practices, insistence on low unit labor costs, rejection of clientelism, as well as municipal indebtedness, and cajas indebtedness, which established Germany as a manufacturing superpower and generated the enormous TARGET related claim of the Bundesbank on the rest of the Eurosystem. Said another way Germany pursued crony capitalism, while France and the periphery South pursued European Socialism, and Greek Socialism, which featured Club Med, undisciplined, libertine, and taxation resistant, liberal economics.

The Euro currency union was fathered, that is created, by the CIA, Wall Street Investment Bankers, and the Council on Foreign Relations, CFR, community, to create a strong NATO, as well as to create a sovereign debt investment carry trade opportunity, profiting from the decline in southern, that is PIIGS, Treasury Debt Interest Rates, as the Euro was introduced.

Now out of periphery sovereign insolvency of Greece, GREK, and Spain, EWP, and banking insolvency, National Bank of Greece, NBG, Banco Santander, SAN, as well as the European Financials, EUFN, a global credit bust, currency crisis, and worldwide financial system breakdown, as prophecied in Revelation 13:3-4, is imminent.

The Beast regime, of Revelation 13:1-4, is already rising out of a rise in Interest Rate on the US Ten Year Treasury Note, ^TNX, and soon will make its beachhead out of the periphery, that is south, profligacy.

The development and use of the Euro, FXE, exasperated the north south divide, to become a nordic latin chasm. The periphery, that is south, will revolve as hollow moons, about planet Berlin and planet Brussels. While the Greeks, the Spanish, and the French, cannot be Germans, all will be one, living in debt servitude in a diktat union, specifically a debt union, a fiscal union, and a banking union, as leaders meet in summits and workgroups, to renounce national sovereignty, and announce pooled sovereignty for regional security, stability and sustainability, where nannycrats call out Authoritarian policy and Authoritarian schemes, establishing regional governance and totalitarian collectivism, in a One Euro Government, that is in a Federal Eurozone Super State.

Choice and credit was the basis of Liberalism. But diktat and debt servitude is the basis of Authoritarianism all of mankind’s seven institutions 1) Education, 2) Finance, Commerce and Trade, 3) Body Politic, 4) Military, 5) Religion, 6) Media, 7) Science and Technology, are integrated into one. The WSJ reports China cash crunch spreads. Businesses Turn to Alternatives Such as Bankers’ Acceptances to Pay Their Bills. Even as Chinese officials indicate a softening of their tight grip on cash, some businesses are reporting liquidity is increasingly hard to find in some places and that customers are turning to alternatives. It isn’t clear how deep the liquidity issues have trickled down from the financial sector, which has been gripped this month by a cash crunch widely believed to be aimed at deflating ballooning credit in the Chinese economy. But it suggests the pain could spread to other areas if cash borrowing rates for banks remain stubbornly high. Over the past couple of weeks companies have increasingly used bankers’ acceptances, a type of short-term guarantee issued by banks to finance trade, to pay their bills instead of cash, according to people in a range of industries around the country.

2E) ,… Friday June 28, 2013

This week Aggregate Credit, AGG, and US Goverment Bonds, GOVT, rose weakly, as the Interest Rate on the US Ten Year Note, ^TNX, traded slightly lower to 2.48% from 2.51%, and the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, flattened somewhat as is seen in the Steepner ETF, STPP, flattening slightly

Of note, Gold Miners, GDX, and Silver Miners, SIL, rose for the second day, despite, Gold, GLD, and Silver, SLV, traded higher. Gold Mining Stocks, such as AUY, had fallen 60% since October 2012; AUY, rose 8% on the day. The chart of Spot Gold, $GOLD, closed the week at $1,232.

For the week the chart of the US Dollar, $USD, close at 83.41, up 1.0%; individual currenies traded lower:

the Japanese Yen, FXY -1.5

the British Pound Sterling, FXB -1.4

the Australian Dollar, FXA -1.3

the Swiss Franc, FXF -1.0

the Euro, FXE -.8

the Indian Rupe, ICN -.7

the Swedish Krona, FXS -.5

Reuters reports Consumer sentiment ends June to near six-year high. I comment that the sentiment comes from Liberalism’s policy of monetary expansion and schemes of Quantitative Eassing, Stimulus, and Global ZIRP. Retailers Macy’s, M, and Pacific Sunswear, PSUN, are outstanding retail stock market performers, as is seen in their combine ongoing Yahoo Finance Chart, having benefited from credit liquidity, and as Doug Noland relates M2 (narrow) “money” supply rose $3.9bn to a record $10.594 TN. “Narrow money” expanded 6.6% ($661bn) over the past year

Doug Noland writes Uninsurable risks. More than a decade ago, Dr. Bernanke, with his “helicopter money” and “government printing press,” arrived on the scene with academic theories to fight the scourge of deflation. Well, the tech Bubble had burst – but I argued strongly at the time that THE greater Credit Bubble was very much alive and well. Extraordinary Fed stimulus was poised to inflate the fledgling mortgage finance Bubble. I argued in 2009 that THE Bubble hadn’t burst, instead unmatched global fiscal and monetary stimulus had unleashed the “granddaddy of them all” – the global government finance Bubble.

I have in past CBBs noted key differences between the traditional government currency printing press and today’s newfangled electronic version. Traditional monetary inflations created government currency – purchasing power that worked to bid up prices throughout the real economy. The contemporary “printing press” creates electronic debit and credit entries that predominantly provide new purchasing power that bids up prices of financial assets. I have argued that this mechanism has been fueling dangerous securities markets and asset Bubbles around the globe. I have further argued that the Fed and central banks had unwittingly nurtured acute Bubble fragility to any potential reduction in central bank liquidity.

How does one reconcile massive ongoing “money printing” with deflating commodities prices and generally contained consumer price inflation? Well, perhaps the commodities market is the proverbial “canary in the coalmine” warning that QE has indeed fueled increasingly vulnerable Credit and asset Bubbles. The backdrop is increasingly reminiscent of the late-1920s, when many (including the Fed) believed weak commodity prices were a call for further monetary accommodation. I am today playing the role of the “old codgers” from the Roaring Twenties that warned of the dangers (and utter futility) of trying to sustain a deeply maladjusted system and historic financial Bubbles. While they were correct in their analysis, history has been unkind to these “liquidationists” and Bernanke “Bubble poppers.”

Dr. Bernanke (and conventional thinking) is convinced the issue during the late-twenties and thirties was deflation and the Fed’s negligence in failing to print sufficient money supply. I am convinced that Bernanke’s analysis is flawed: the key issue was the Fed repeatedly placed “coins in the fusebox” during the twenties – in the process accommodating precarious financial and economic Bubbles.

Quantifying current Bubble risk is an impossible task. Global debt and securities markets easily surpass a hundred Trillion. Gross derivative exposures are in the many hundreds of Trillions. The now enormous Chinese and EM financials systems, in particular, lack transparency. The amount of global speculative leverage is unknown. The degree of global financial distortion and economic maladjustment will not become apparent until the next major period of market risk aversion and resulting tightened global financial conditions. For now, recent market gyrations support my view of precarious Latent Market Bubble Risks.

I’ll attempt to use some data to illustrate how Fed policymaking has greatly exacerbated already outsized market risks. As a crude proxy for “market risk,” I’ll combine outstanding Treasury debt, Agency debt/MBS, Corporate bonds, municipal debt and the value of U.S. equities – securities that fluctuate in the marketplace based upon perceptions of value, liquidity and risk. It is worth noting that “market risk” had inflated to $33 TN during the booming nineties, after beginning the decade at $10 TN. Importantly, the nineties saw a fundamental shift to market-based Credit instruments, with the proliferation of ABS, MBS, the GSEs and “Wall Street Finance” more generally.

I have over the years argued that Credit is inherently unstable. The move to market-based debt instruments created an acutely unstable Credit system, instability that provoked a change at the Federal Reserve to a policy regime committed to backstopping the securities markets. For more than twenty years now, this new policy regime has led to an unending series of Bubbles, booms and busts, even more aggressive policy responses and only bigger, more precarious Bubbles. This is critical analysis that remains completely outside of mainstream economic thinking.

When Dr. Bernanke began his crusade against deflation risk back in 2002, “market risk” was at $29.7 TN. Extraordinary monetary stimulus (and resulting mortgage finance Bubble excess) was instrumental in market risk surging to $53 TN by the end of 2007, before dropping abruptly to $44.8 TN in 2008. During the past four years, “market risk” has inflated $16.7 TN, or 37%, to a record $61.5 TN. Perhaps more illuminating, as a percentage of GDP, “market risk” began the 1990′s at 182% and closed the decade at 323%. While conventional thinking subscribes to the deleveraging viewpoint, I believe the data strongly support my re-leveraging and historic Bubble thesis.

I will posit that years of central bank intrusion and market domination have made global risk markets “Uninsurable.” “Market risk” has ballooned precariously higher, with massive issuance of non-productive government debt and other late-cycle private-sector Credit excesses. Meanwhile, central bank liquidity injections have inflated global asset market prices, while inciting speculation along with a manic global search for yield. Maladjusted global economies are increasingly succumbing to the debt and maladjustment overhang, while Financial Euphoria has seen securities markets inflate into dangerous speculative Bubbles.

There is a great flaw in the Bernanke doctrine of inflating the Fed’s balance sheet to both accommodate massive fiscal deficits and inflate securities markets, while using zero rates to force savers into the risk markets. This has led to an unprecedented (and problematic) mispricing of debt and securities prices globally, while incentivizing leveraging and speculation. Trillions of risk-conscious “money” has flowed into global markets (through ETFs, hedge funds, mutual funds, etc.) with little appreciation for the true risk-profile of global financial markets. One could say a Bubble in perceived low-risk “investing” evolved into a key facet of the overall global market risk Bubble.

Importantly, at least segments of the “global leveraged speculating community” must by now be increasingly impaired. The gold, precious metals and commodities “reflation trade” has been an unmitigated disaster. While not yet a full-fledged disaster, the popular emerging market (EM) trade is unraveling. The currencies and global leveraged “carry trades” have become a perilous minefield. Global fixed income markets, more generally, are increasingly unstable and illiquid.

Above I mentioned how Federal Reserve doctrine changed during the nineties to support the proliferation of market-based Credit. The market for derivatives and myriad types of risk insurance ballooned right along with Credit and market risk during the 1990s. I’ve argued over the years that Credit and financial market risk were actually Uninsurable – in that they are neither random nor independent events such as car accidents and house fires. Actually, it is the nature of market risks to come in particularly non-random and non-independent waves. Somehow the lessons of 2008 were quickly unlearned.

Global central banks have unwittingly inflated risk and grossly distorted the risk “insurance” landscape across global risk markets. We’ll see how long “capital” continues to flock to global securities markets. Early indications of how global risk markets will function in the face of a reversal of flows is anything but encouraging.

FT reports Greece faces collapse of second key privatization. Greece is struggling to avoid the collapse of a second big privatisation, amid pressure from bidders for the state gaming monopoly to change terms of a deal agreed last month. The problems with the €700m sale of OPAP threaten to add to tension with Greece’s international creditors, who fear the slow pace of privatisations will require further more cuts to keep the country’s bailout programme on track. Emma Delta, a bid vehicle backed by Greek oil tycoon Dimitris Melissanidis and Czech billionaire Jiri Smejc, made the only offer for the Greek state’s 33 per cent holding in OPAP. According to documents seen by the Financial Times, Emma Delta now wants to cancel two elements of the deal: a three-year, €110m contract with Intralot, OPAP’s Athens-based technology supplier; and a 12-year concession to operate the Greek state lottery in return for a €190m down payment and €50m annually.

The lottery was awarded last year to a consortium including OPAP, Intralot and Scientific Games of the US, the world’s largest lottery software provider. Neither contract has been signed. Greece’s privatisation agency, Taiped, has rejected formal complaints by Emma Delta threatening to pull out of the deal and take legal action if its demands are not met.

Costas Louropoulos, OPAP’s chief executive, complained in an email seen by the FT that he felt put under pressure by Mr Melissanidis in a series of telephone calls. “He insulted me, as on many previous occasion. You dare to sign [the Intralot and lottery contracts] and I will take your head off,” Mr Louropoulos quoted Mr Melissanidis as telling him on May 20. Taiped failed to deliver one flagship privatisation this month when Gazprom unexpectedly pulled out of the bidding for the state natural gas supplier Depa. If the OPAP sale falls through, Greece’s privatisation programme will be in disarray, raising the possibility that the “troika” of international lenders – the International Monetary Fund, European Central Bank and EU Commission – could appoint international managers to replace Greek executives hired by the Athens government to sell €15bn of state assets by 2016.

A review of Greece’s bailout by the IMF this month found that income lost through slippage of the privatisation programme would contribute to a hole in Athens’ budget and “additional financing will need to be identified”. The disposals of Depa and OPAP were expected to cover about half this year’s €2.6bn target for privatisation revenues agreed with the EU and IMF but failure to sell OPAP would probably to see income from disposals this year fall below €1bn. The target has already been revised downwards twice because of the risks associated with investing in recession-mired, politically unstable Greece. Taiped has pulled off only one sizeable deal this year: the €400m sale of Desfa, the natural gas grid operator to Socar, the state gas operator of Azerbaijan.

Stelios Stavridis, Taiped’s chairman, insists that the OPAP deal must not be changed. “The country’s credibility is at stake,” he said. “We’ve made clear that we’re responsible people [at Taiped] and that no one can interfere with our work.”

Mr Melissanidis controls Aegean Marine Petroleum Network, a global supplier of marine fuel listed on the New York Stock Exchange. Mr Smejc is the owner of Emma Capital, an investment company, and is one of the largest shareholders in Greece’s Piraeus Bank.

The other partners in the vehicle are also financial investors: Russia’s ICT group, J&T Finance of Slovakia, Czech-based KKCG and Christos Copelouzos, a Greek businessman with ties to Gazprom. Lottomatica, the Italian gaming operator, is also a participant.

Critics of Greek privatisation say the OPAP dispute illustrates how Taiped’s mandate to “sell to the highest bidder” without giving priority to qualitative criteria or operational experience has undermined the programme. “The programme has suffered overall because of a lack of interest from globally recognised players,” said one consultant who declined to be named.

Mr Stavridis, Taiped’s third chairman in less than a year, said he was “cautiously optimistic” about persuading Emma Delta to drop its demands. “We negotiated the OPAP deal in a transparent way and in line with international practice. Now we have to make it stick,” he says.

Bloomberg reports China bad loan alarm sounded by record bank spread jump. Borrowing costs for Chinese banks have surged the most in at least six years this month as rating companies say a cash crunch threatens to swell bad loans. The yield spread for one-year AAA bank bonds over similar maturity sovereign notes jumped 56 basis points so far this month to 163 basis points, the most in ChinaBond records going back to 2007. The similar AA gap widened 59 basis points to 188. Even as China Construction Bank Corp President Zhang Jianguo said yesterday cash conditions have normalized, the benchmark seven-day repurchase rate was fixed at 6.85 percent, almost twice the 3.84 percent average for this year.

The PBOC is seeking to wring speculative lending out of the system after total credit approached 200 percent of gross domestic product, according to Fitch Ratings. “There could be unintended consequences from the central bank’s approach,” said Liao Qiang, a Beijing-based director at Standard & Poor’s. “We expect some deleveraging at banks’ interbank and wealth management businesses to unfold. Credit growth would slow. This could pressure banks’ asset quality.”

The one-year interest-rate swap, the fixed cost needed to receive the floating seven-day repurchase rate, touched an all-time high of 5.06 percent on June 20, according to data compiled by Bloomberg. The one-day repo rate surged to a record 12.85 percent the same day, according to a daily fixing announced by the National Interbank Funding Center.

The yield on 10-year government bonds rose 13 basis points to 3.60 percent last week, while the one-year borrowing cost jumped 51 basis points to 3.61 percent, inverting the so-called yield curve for the first time in ChinaBond data going back to 2007. The 2023 yield closed at 3.53 percent yesterday.

Chinese commercial banks’ outstanding non-performing loans rose 20 percent to 526.5 billion yuan ($86 billion) at the end of the first quarter from a year earlier, accounting for 0.96 percent of total lending, according to data from the China Banking Regulatory Commission. Those figures don’t reflect the real amount of debt because of the ways banks move loans off their books, Charlene Chu, Fitch’s Beijing-based head of China financial institutions, said in April. Some loans are bundled and sold to savers as wealth-management products, which pay more than regulated deposits, she said. Other assets are sold to non-bank institutions, including trusts, to lower bad-debt levels.

Non-performing loans may rise faster as weaker borrowers have difficulty refinancing credit in the coming months, Moody’s Investors Service warned on June 24. The official Xinhua News Agency said in a June 23 analysis that risk is increasing in the financial system as the shadow-banking sector expands and institutions make more highly leveraged investments. Shadow lending flourishes in China because an estimated 97 percent of the nation’s 42 million small businesses can’t get bank loans, according to Citic Securities Co., and savers are seeking higher returns. The industry may be valued at 36 trillion yuan, or 69 percent of gross domestic product, JPMorgan Chase & Co. estimated last month. The crackdown may damage the economy by shrinking funding for smaller companies, Barclays said.

The nation’s outstanding amount of wealth-management products rose by 500 billion yuan to 13 trillion yuan in the first five months of this year, accounting for 16 percent of the nation’s deposits, according to estimates published by Fitch on June 10. That compares with a 4 trillion yuan increase for the whole of 2012.

An estimated 1.5 trillion yuan of wealth management products were to mature in the last 10 days of this month, Fitch Ratings said June 21. Issuance of new products and borrowing from the interbank market are among the common sources of repayment for maturing products, it said. Fallout from unofficial lending led more than 80 businessmen to commit suicide or declare bankruptcy over six months in 2011-2012 in the southeastern exporting hub of Wenzhou, a city of 9 million residents whose 400,000 small businesses make products ranging from cigarette lighters to eyeglasses.

A disorderly unwinding of debt is possible. “The problem is that when debt levels have got so high, and it’s more debt that keeps the existing debt afloat, you absolutely have to stop the process, but it’s very difficult to do so in an orderly way,” said Michael Pettis, a finance professor at Peking University “There’s always a risk that the unwinding of the debt becomes disorderly and the PBOC will be blamed for mismanaging the process.” About 563 new wealth products were issued last week, two-thirds more than the previous period, according to Benefit Wealth, a Chengdu-based consulting firm that tracks the data. China Minsheng Banking Corp., the nation’s first privately owned lender, is marketing a 35-day product that offers an annualized yield of 7 percent. China’s one-year benchmark deposit rate is 3 percent. Mid-sized banks get an average of 20 percent to 30 percent of their funds from such products, according to Fitch, which didn’t name specific lenders. That makes these banks more susceptible to default risks on the products.

The China Banking Regulatory Commission told banks in March to cap investments of client money in debt that isn’t publicly traded at 35 percent of all funds raised from the sale of wealth management products. The next steps may include tightening that sends some smaller financial institutions into bankruptcy, according to analysts at Nomura Holdings Inc. “What we will see over the next half year is credit growth overall will slow down a bit,” Stephen Green, head of Greater China research at Standard Chartered Plc, said in a Bloomberg TV interview from Shanghai. “If interbank rates remain quite volatile and at high levels, then that’s obviously going to have a bigger feed through to credit.” The PBOC’s decision to refrain from pumping “hefty” sums into the financial system last week was a “bold but essential move to discipline unchecked lenders,” Xinhua said in a June 26 commentary, adding that the pain is needed to pave the way for a more sustainable economy.

China Construction Bank president Zhang welcomed what he called the PBOC’s “proactive attitude” to a changing market situation. “China Construction Bank hasn’t stopped new lending in any sort of period, or to any sort of clients,” Zhang said at the opening of a bank branch in Taipei yesterday. “Recently there was a temporary liquidity squeeze condition, but CCB’s cash is so adequate that we were able to lend money to our peers. The cash shortage condition has eased in the last two days, and by now the situation has already normalized.” The central bank, which was silent during the worst of the cash crunch, published a statement on June 24 saying there’s a reasonable amount of liquidity in the financial system and that banks should control risks from credit expansion, including those associated with maturity mismatches.

The PBOC will use all kinds of tools to appropriately adjust liquidity in the market and maintain the overall stability, Governor Zhou Xiaochuan said at a forum in Shanghai today. China will continue to implement a prudent monetary policy and allow more foreign participation in the interbank money, foreign exchange and bond markets, he said. “No policy maker can afford to be blamed for being responsible for an unnecessary, fully-avoidable financial meltdown and growth hard landing,” Bank of America Merrill Lynch economists wrote in a report yesterday. “With a month of mess in the interbank liquidity, it’s time to re-highlight stability and it’s time for markets to calm down.” The cost of protecting China’s government debt from default slipped five basis points in New York to 116 yesterday and is up 29 basis points this month, according to prices from data provider CMA. The contracts pay the buyer face value in exchange for underlying securities or the cash equivalent if a borrower fails to adhere to its debt agreements. The contract on Bank of China Ltd dropped 28 basis points to 165 yesterday and is 51 basis points higher for June. “Smaller banks short of deposits will face significant pressure from liquidity management,” said Zhou Hao, a Shanghai-based economist at Australia & New Zealand Banking Group Ltd , ANZ, “If the weakest link breaks, there’s an increase in the likelihood of creating systemic risks.”

Benton te writes This week the Dow Jones via tradingcharts.com says that foreigners Bought net Y171.2B of Japanese stocks. The more important force has been the “Mr. Watanabes” or the highly leveraged retail investors. Abenomics has encouraged rampant retail speculation via massive leverage.

Such dramatic use of leverage by retail participants only increases credit risks of the many Mr. Watanabes and the financial institutions financing them. Moreover, this shifts the public’s incentives from productive undertaking towards speculative activities. The short term orientation implicitly promoted by such policies will not only dissipate savings, it will erode people’s moral fiber who will see easy money rather than work and savings as virtues. It is disheartening to see that many of the average Japanese have been converted into chronic gamblers due to reckless inflationist policies. Abenomics seems to have transformed Japan’s financial markets into a grand casino.

Get ready for the global banking margin collateral call. Michael Snyder in the Economic Collapse Blog writes the worst part of the slaughter is going to be when the 441 trillion dollar interest rate derivatives time bomb starts exploding. If bond yields continue to soar, eventually it will take down some very large financial institutions. The following is from Bill Holter writing in Mills Franklin Blog The button has been pushed … Ready or not. Please understand how many of these interest rate derivatives work. When the rates go against you, “margin” must be posted. By “margin” I mean collateral. Collateral must be shifted from the losing institution to the one on the winning side. When the loser “runs out” of collateral, that is when you get a situation similar to MF Global or Lehman Brothers, they are forced to shut down and the vultures then come in and pick the bones clean normally. Now it is no longer “normal,” now a Lehman Bros will take the whole tent down. Most people have no idea how vulnerable our financial system is. It is a house of cards of risk, debt and leverage. Wall Street has become the largest casino in the history of the planet, and the wheels could come off literally at any time.

Brandon T Ward writes Europe makes Cyprus bailin a continental template. EU finance ministers announced that they had reached agreement on the principles governing the imposition of losses on creditors in bank ‘bail ins’. Having already agreed to establish “depositor preference” in the pecking order of creditors at risk, the stumbling block to agreement was the availability of flexibility at the national level to complement the bail in with injections of funds from other sources. Under the compromise achieved overnight, once a bail in equivalent to 8% of total liabilities has been implemented, support from other sources can be used (up to 5% of total liabilities) with approval from Brussels.

So investors (i.e. yield chasers) and not taxpayers will foot the cost of bank bailouts going forward for a change? Maybe on paper: “From 2018, the so-called “bail-in” regime can force shareholders, bondholders and some depositors to contribute to the costs of bank failure. Insured deposits under €100,000 are exempt and uninsured deposits of individuals and small companies are given preferential status in the bail-in pecking order.” In reality, last night’s agreement is the usual fluid melange of semi-rigid rules filled with loopholes designed to benefit large banks whose impairment may be detrimental to “systemic stability”. To wit, from the FT: “While a minimum bail-in amounting to 8 per cent of total liabilities is mandatory before resolution funds can be used, countries are given more leeway to shield certain creditors from losses in defined circumstances.” In other words, here is the bail in regime … which we may decide to ignore under “defined circumstances.”

I relate that The Great Nine Investments, that is XLU, IXG, KXI, XOP, XTN, IYC, MTK, XLI, IHF, seen in this Finviz Screener and shown in this Finviz screener illustrates that the Interest Rate Sensitive Utilities, XLU, are the market leaders in the transition out of Liberalism and into Authoritarianism, as is seen in their combined ongoing Yahoo Finance Chart. In as much as Utilities, XLU, rose to strong resistance this week, this week’s rally is all the rallying that is likely to occur, and represents a good opportunity to sell out of stocks before they plummet lower.

Regimes and their policies and schemes govern to establish and define life until terminated by an “extinction event”.

The fast rise in the US Ten Year Note, ^TNX, to 2.01%, on May 24, 2013, was such an “extiction event”: it caused the death of Credit, AGG, as reflected in Build America Bonds, BABS, the 30 Year US Government Bonds, EDV, the 10 Year US Government Note, TLT, the Emerging Market Bonds, EMB, Mortgage Backed Bonds, MBB, Municipal Bonds, MUB, World Treasury Bonds, BWX, and Junk Bonds, JNK, to increasingly trade strongly lower.

Vivianne Rodrigues and Stephen Foley of Financial Times report The $3.7tn market for tax-exempt securitiess has seen prices plunge, yields trade at 2-year highs and state governments and agencies cancel or postpone almost $2.6bn in sales in the past week. Fundraisings for hospitals in California, schools in Georgia and for the New York transportation system, which is still being repaired after Hurrican Sandy, are among those that have been pulled. ‘We are expericenicing quite a bit of selling in munis and not all of it has been very orderly,’ said Stephen Winterstein, chief strategist in municipal fixed income at Wilmington Trust Investment Advisors. ‘At one point, it felt a bit like 2008 when we saw a tremendous amount of volatility and illiquidity in markets.

Brian Chappatta of Bloomberg reports The yield penalty on Michigan’s debt has climbed 40% in less than two weeks as defaults by Detroit and two school districts lead investors to question the state’s commitment to protect bondholders. Buyers demand about 0.49 percentage point of extra yield to own general obligations of Michigan instead of benchmark securities.

Gabrielle Coppola and Boris Korby of Bloomberg report The worst sell-off in developing nation debt in more than four years and nationwide protests in Brazil are shuttering the world’s largest emerging bond market for the first time since August. Meatpacker Minerva SA last week became the second Brazilian company to cancel an overseas bond sale this month as average borrowing costs for the nation’s issuers surged 1.23 percentage points to a four-year high of 7.11%. Corporate dollar bonds in Brazil have lost 9.3% this year. After Brazilian companies borrowed $22.9 billion internationally in the first five months of the year, the third fastest pace on record, no offerings of at least $500 million have been completed in June.

David Yong of Bloomberg reports For the first time since August, junk bonds are trading below par amid speculation that companies will have a harder time meeting debt payments as the Federal Reserve prepares to reduce its extraordinary stimulus measures and China reins in its shadow-banking system. Average prices on speculative-grade corporate notes dropped to 99.42 cents on the dollar on June 25, from a record 106.04 cents in May, according to Bank of America Merrill Lynch’s Global High Yield Index. The declines were led by Asia, which saw prices tumble to 97.2 cents, the lowest level in a year.

Kyoungwha Kim and Helen Yuan of Bloomberg report The equivalent of about $7 billion in yuan bond sales have been postponed during China’s two-week cash crunch and treasurers say they remain cautious despite central bank reassurances the squeeze is temporary. Domestic debt sales dropped 42% so far in June to 179.4 billion yuan ($29.2bn), poised for the worst month since January 2012… At least 22 companies including China Development Bank Corp. canceled or delayed sales. Average yields on one-year AAA rated corporate debt surged 148 bps this month to 5.428%, the highest since October 2011.

Bloomberg reports Borrowing costs for Chinese banks have surged the most in at least six years this month as rating companies say a cash crunch threatens to swell bad loans. The yield spread for one-year AAA bank bonds over similar-maturity sovereign notes jumped 56 bps so far this month to 163 bps, the most in ChinaBond records going back to 2007.

Lingling Wei and William Kazer of WSJ report China’s crackdown on rampant credit growth is starting to slam bank shares and take a toll on the country’s vast informal lending system. China stocks posted their worst one-day loss in nearly four years on Monday as shares of midsize banks plunged, contributing to a broad regional decline in equities and commodity markets. The benchmark Shanghai Composite Index slid 5.3% to its lowest level since December. Meanwhile, one corner of what is known as China’s shadow banking system has seen a marked slowdown in recent weeks. China’s trust companies, which raise money from wealthy individuals by selling investment products that pay higher returns than bank deposits, then lend out the money to businesses unable to get loans from traditional banks, have scaled back issuance of investment products as the cash shortage has shaken investors’ confidence. A total of 178 such investment products have been sold so far this month, according to Use Trust. The total is less than half of the volume sold in the first three weeks of last month. ‘The future of the industry is now entirely up to the central bank’s policy stance,’ said a senior executive at Ping An Trust, a large trust company owned by one of China’s largest insurers, Ping An Insurance.

Rachel Evans of Bloomberg report Bank of China Ltd., Export-Import Bank of China and China Development Bank Corp. led gains in Asian bond risk last week as Moody’s and Standard & Poor’s warn credit curbs threaten some lenders. Prices of swaps tied to Bank of China, the nation’s fourth- largest lender, rose 70.4 bps last week to 192.4. The cost of insuring Asian corporate and sovereign bonds from default surged 27.6 bps last week, the most since November 2011, CMA prices show. CDB, the nation’s biggest policy lender, scrapped a bond sale as the People’s Bank of China said today that lenders must control liquidity risks from credit expansion. ‘Non-performing loans are likely to rise more rapidly in the coming months as weaker borrowers find refinancing conditions more challenging,” Bin Hu, senior analyst at Moody’s, wrote ‘Another risk is that the PBOC’s actions will make banks more nervous about each other’s creditworthiness.

Blake Schmidt of Bloomberg reports The record rout in Brazilian bonds is deepening on speculation President Dilma Rousseff’s vow to boost spending to placate protesters will swell the budget deficit at a time when a stagnating economy saps tax revenue. Brazil’s real-denominated bonds due 2023 have plunged this month, causing yields to jump to a 15-month high of 11.63% on June 21 even as the Treasury offered to buy back the notes in five unscheduled auctions this month. Rousseff, whose government recorded the biggest deficit in almost four years in April, urged fiscal restraint in a meeting with governors and mayors and then pledged to earmark 50 billion reais ($22bn) more to upgrade urban transportation.

I relate that another word for credit is trust, and as a result of the death of former on May 24,2013, investors have deleverged out of yield bearing investment, such as Utilities, XLU, Global Utilities, DBU, Mortage REITS, REM, Global Real Estate, DRW, Industrial Office REITS, FNIO, Small Cap Real Estate, ROOF, Real Estate REITS, RWR, as well as, and most significantly, Global Financials, IXG.

The failure of seigniorage that is moneyness, on the higher Interest Rate on the US Ten Year Note, ^TNX, moving higher beginning in May 2010, has stimulated investors to derisk out ouf nation investment, EFA, thereby, destabilizing democracies, as well causing a sell of Major World Currencies, DBV, such as the Australin Dollar, FXA, and Emerging Market Currencies, CEW, such as the Brazilian Real, BZF, and the India Rupe, ICN. A loss of seigniorage begets the loss of sovereignty, which communicates that Liberalism’s current democratic nation state regime, will be replaced by Authoritarianism’s regional governance regime.

The quick rise in the Interest Rate on the US Ten Year Note, ^TNX, on May 24, 2013, terminated the vitality of Liberalism’s policies of monetary easing and credit liqudity, and its schemes of risk-on, moral hazard based, speculative, leveraged investment choice, that has come via finacialization and dollarization.

The world central banks monetary policies of Quantitative Eassing, Stimulus, and Global ZIRP, and especially Kuroda Abenomics, have finally crossed the Rubicon of sound monetary policy and have made “money good” investments bad. And as a result, the Investment Bankers, KCE, such as JPMorgan, JPM, Asset Managers, such as Blackrock, BLK, and Eaton Vance, EV, which have coined Liberalism’s wealth via ETFs, and the Stock Brokers, IAI, such as TROW, which harnessed those ETFs for investor’s gains, are now trading lower in value.

There be new dynamos for a new regime. Regionalism, or perhaps better said, regionalization, specifically the drive for regional security, stability, and sustainability, will vitalize Authoritrianism’s policies of regional governance, and schemes of bank deposit bailins, and new taxes, as well as statist public private partnerships to oversee the factors of production, and manage commerce and trade.

Debt deflation, that is currency deflation, has come to Australia Dividends, AUSE, Brazil Financials, BRAF, India Earnings, EPI, Chinese Financials, CHIX, Emerging Market Financials, EMFN, Far East Financials, FEFN, and European Financials, EUFN, which has caused a great sell off in risky Small Cap Nation Investment, such as ECNS, EWZS, ERUS, IDXJ, SCIN and KROO.

The rise in the US Ten Year Notee, TNX, coming at the hands of the bond vigilantes successfully calling interest rates higher, in their ongoing currency war against the world central banks, has stimulated strong disinvestmwent out of Australia, EWA, the BRICS, BRICS, EWZ, RSX, INP, YAO, as well as out of the Emerging Markets, EEM, such as TUR, THD, IDX, EPHE, EGPT, ENZL, GREK, EWW, ECH, EPU, and ARGT.

Please consider the Dispensation Economics Manifest concept that the Fed is dead; an organism, having no life, that is no vitality; and as such has no authority or power. The US Federal Reserve, and other central banks, and their agents, that is World Investment Institutions, IXG, such as the Too Big To Fail Banks, RWW, BAC, C, Asset Managers, BLK, Investment Bankers, KCE, JPM, Stockbrokers, IAI, TROW, Regional Banks, KRE, GBCI, European Financials, EUFN, SAN, Far East Financials, FEFN, NMR, Emerging Market Financials, EMFN, ITUB, Chinese Financials, CHIX, SHG, are the Banker regime’s monetary institutions, put in the grave by the failure of Credit, AGG, with the bond vigilantes calling the Interest Rate on the 10 Year Note, TNX, higher. to 2.01% on May 24, 2013. These institutions are seen as tombstones in Liberalism’s graveyard, as one looks in one’s rear view mirror. The Fed is as dead as dead can be, terminated by the “extinction event” of the rise in ^TNX.

Now, regional governance institutions such as the European Finance Ministers, the IMF, and the Troika, are the enlivened monetary and political authorities of the Beast regime. The “extinction event” of the rise in the Interest Rate on the US Ten Year Note, ^TNX, terminated all of the authority of Liberalism’s policies and schemes, thereby ending Liberalism’s life experience. Now, Authoritarianism’s policies and schemes, have authority, and ever increaing power, providing monetary and also political life experience.

Through the Economy of God, that is the household administration of all things, for the completion of every age, epoch, era, and time period, Ephesians 1:10, Jesus Christ, is powering up Authoritarianism’s dynamo of regionalism, which replaces crony capitalism, European Socialism and Greek Socialism, as foretold in Revelation 17:12. He is bring forth ten reigonal kingdoms: “The ten horns of the beast are ten kings who have not yet risen to power. They will be appointed to their kingdoms for one brief moment to reign with the beast.”

Yes, yes, yes, The Fed is dead. Jesus Christ did what Ron Paul could not do, He ended the Fed. He slayed it by turning the bond vigilantes and the currency traders loose on the markets. But wait a New Monster is replacing it. While the Free To Choose Monster is indeed history, the Regional Governance and Totalitarian Collectivism Monster is coming as the North American Union, or what I call Can Mex America, a Continental Behemoth featuring totalitarian collectivism integrating mankind’s seven institutions: 1) Education, 2) Finance, Commerce and Trade, 3) Body Politic, 4) Military, 5) Religion, 6) Media, 7) Science and Technology. Public private partnerships will oversee the factors of production and manage commerce and trade.

Equity sectors rising this week included.

IBB 3.0

RXI 2.2

PBD 2.1

CARZ 2.0

IXG, 1.8

PPA, 1.8

SMH 1.8

XRT 1.7

PBS 1.7

ITB 1.5

BJK 1.3

FDN 1.2

IHF 1.2

WOOD 1.1

Equity sectors falling this week included

COPX -4.2

PICK -3.5

KOL -2.9

URA -2.1

CHII -0.2

3) … News of the Ezekiel 38 War

Conn Hallinan writes in Antiwar Syria and the Monarchs: A Perfect Storm. The Obama Administration’s decision to directly supply weapons to the Syrian opposition may end up torpedoing the possibility of a political settlement. It will almost certainly accelerate the chaos spreading from the almost three-year old civil war. It will also align Washington with one of the most undemocratic alliances on the planet, and one that looks increasingly unstable.

In short, we are headed into a perfect political storm.

While the rationale behind the White House’s decision to send light arms and ammunition to the rebels is that it will level the playing field and force the Assad regime to the bargaining table, it much more likely to do exactly the opposite. The United States is now a direct participant in the war to bring down the Damascus regime, thus shedding any possibility that, along with Russia, it could act as a neutral force to bring the parties together.

Of course Washington has hardly been a disinterested bystander in the Syrian civil war. For more than two years it has helped facilitate the flow of arms from Qatar, Saudi Arabia, Turkey, and the United Arab Emirates across the Jordanian and Turkish borders, and the CIA is training insurgents in Jordan. But the White House has always given lip service to a “diplomatic solution,” albeit one whose outcome was preordained: “Assad must go,” President Obama said in August 2011, a precondition that early on turned this into a fight to the death. As Ramzy Mardini, a former U.S. State Department official for Near Eastern affairs, recently wrote in the New York Times, “What’s the point of negotiating a political settlement if the outcome is already predetermined?”

A Regional Scourge. It is hard to tell if the administration’s policies around Syria are Machiavellian or just stunningly inept. Take President Obama’s famous “red line” speech warning the Assad regime that the use of chemical weapons would trigger U.S. military intervention. Didn’t the president realize that his comment was a roadmap for the insurgency: show that chemical weapons were used and in come the Marines? As if on cue, the insurgents began claiming poison gas was used on them, a charge the Damascus regime has denied.

Whether there is any truth to the charge is hard to tell since neither the British, the French, nor the Americans have released any findings. “If you are the opposition and you hear” that the White House has drawn a red line on the use of nerve agents, then “you have an interest in giving the impression that some chemical weapons have been used,” says Rolf Ekeus, a Swedish scientist who headed up the UN weapons inspections in Iraq. Carla Del Ponte, of the UN Commission of Inquiry on Syria, says it was the insurgents who used poison gas, not the Syrian government.

The French and the British are hardly neutral bystanders, with long and sordid track records in the region. It was Paris and London that secretly divvied up the Middle East in the 1916 Sykes-Picot Agreement, and who used divisions between Shiites, Sunnis, and Christians to keep their subject populations at one another’s throats. Both countries just successfully lobbied the European Union to end its arms embargo on the Syrian combatants and are considering supplying weapons to the insurgents.

Besides the growing butcher bill in Syria – according to the UN the death toll is now over 93,000, with a million and a half refugees – the war is going regional, particularly in Iraq and Lebanon. Turkey and Jordan are also being pulled into the maelstrom.

Fighting between Shiites and Saudi-sponsored Sunni extremists in Lebanon’s northern city of Tripoli is drawing in the Lebanese Army, which recently issued a warning that sectarian violence was getting out of control. There is fighting between Assad loyalists, Sunni insurgents, and the Shiite-based organization Hezbollah on both sides of Lebanon’s border with Syria.

In the meantime, Sunni extremists are waging a car-bombing offensive against the central government in Iraq. According to the UN, 1,000 Iraqis were killed in May, and the toll continues to mount. A recent bombing in a Turkish border town killed 51 people and local Turks blamed the insurgents, not the Assad regime.

The war has put economically fragile Jordan on the front lines. Some 8,000 troops from 19 countries just completed war games entitled “Eager Lion” in that country. The 12-day exercise was aimed, according the Independent (UK), at preparing “for possible fighting in Syria.” The United States has deployed Patriot missiles, troops, and F-16 fighter-bombers in Jordan.

While the Syrian civil war started over the Assad regime’s brutal response to demonstrators, it has morphed into a proxy war between Syria, Iran, Russia, and

Iraq on one side, and the United States, France, Britain, Israel, Turkey, and the monarchies of the Gulf Cooperation Council (GCC) on the other. The Council includes Bahrain, Kuwait, Saudi Arabia, Qatar, Oman, the United Arab Emirates, and new members Morocco and Jordan.

The GCC is playing banker and arms supplier to the insurgency, much the same role it played in Libya’s civil war. Qatar has poured more than $3 billion into the effort to upend Assad, and, along with Saudi Arabia and the United States, helped shift Egypt from its initial support for a diplomatic solution to backing a military overthrow of the Damascus regime.

Egypt is in the midst of a major financial crisis, and Qatar has agreed to invest billions in its economy. Such investments come with strings, however, and Qatar and its Gulf allies are not shy about using their cash to get countries on board with their foreign policy goals. Ahram Online said a major reason for Egypt’s diplomatic shift was “the hope of soliciting desperately need financial and fuel aid” from Saudi Arabia.

According to Ahram, Egyptian President Mohamed Morsi bucked the advice of his top aides to switch positions. The April 6 Democratic Front Movement accused Morsi of caving in to “Washington” and extremist “Salafist Sheikhs.” Egypt is also trying to land a loan from the International Monetary Fund, over which the United States wields considerable influence. It is hard to see Egypt’s shift as anything but a quid-pro-quo for a bailout.

Houses Divided. The Gulf Council has almost unlimited amounts of cash at its disposal, but how stable are the monarchies that make it up? Last year Bahrain was forced to use Saudi Arabian troops to quash protests by its Shia majority demanding democratic rights. The United Arab Emirates charged 94 people with conspiracy because they asked for democratic rights. They face 15 years in prison. Qatar recently sentenced a poet to 15 years for writing a “subversive” poem.

The monarchs’ bitter opposition to anything that smacks of democracy or representative government suggests that their crowns do not sit all that firmly on their heads.

Saudi Arabia is a case in point. While it is the world’s biggest oil exporter, it has a growing population – at 30 million, larger than the other Gulf members of the GCC put together – and unemployment among Saudis aged 20 to 24 is around 40 percent. The kingdom is also facing a restive Shia population in its eastern provinces.

The Saudi monarchy has dealt with opposition through a combination of stepped-up repression and a $130-billion spending program. But as Karen House points out in her book On Saudi Arabia, the country’s “High birthrate, poor education…and deep structural rigidities in the economy, compounded by pervasive corruption, all have led to a decline in living standards…Many of [the] young feel their future is being stolen from them.”

The other Gulf monarchies are rich – Jordan is the exception – but lack population and rely on imported workers to meet their labor needs. Because there is essentially no public oversight, the monarchies tend to breed corruption. The Saud family has some 7,000 princes, all of whom have special access to the vast wealth of the country.

A generation ago that corruption could be easily covered up, but the Internet makes that increasingly difficult. Twitter and YouTube have a huge following in Saudi Arabia.

Yet it is with these monarchies – the world’s last bastions of feudal power – that the United States and its NATO allies have made common cause.

Reliance on the GCC also means that Washington is essentially part of the Sunni jihad against Shiites in Lebanon, Syria, Iraq, and Iran. However, while the Shiite-Sunni conflict is important and long-standing, the fact that Iran, Syria, and Iraq have very different foreign policies from the GCC has more to do with the Council’s hostility to Tehran than religious differences.

It was Jordan’s King Abdullah who first warned that a “Shiite Crescent”, Hezbollah, Syria, Iraq, and Iran, was a threat to the Middle East, a “warning” that conveniently fit into the Washington’s drive to build an alliance against Iran. But elevating sectarian divisions in Islam into an alliance not only helped unleash Sunni extremists, including the al-Qaeda-linked groups in Syria that reportedly worry Washington, it opened a Pandora’s Box of ethnic divisions that the United States and the Gulf monarchies may yet come to regret.

John Naughton of the Observer relates NSA surveillance: don’t underestimate the extraordinary power of metadata, Four years ago a German Green party politician, Malte Spitz, sued to have Deutsche Telekom hand over six months of his phone data that he then made available to Zeit Online. The paper then did what any decent NSA operative would do, namely combine his phone’s geolocation data with information relating to his life as a politician, Twitter feeds, blog entries and websites, to create an extraordinary animated reconstruction of a day in his life. It’s this revelatory power that enables metadata to expose far more than what a target is talking about. Matt Blaze of Wired.com, a crypto researcher at the University of Pennsylvania, “Metadata is our context. And that can reveal far more about us, both individually and as groups, than the words we speak. Context yields insights into who we are and the implicit, hidden relationships between us. A complete set of all the calling records for an entire country is therefore a record not just of how the phone is used, but, coupled with powerful software, of our importance to each other, our interests, values, and the various roles we play.”

blimy_4321 comments The protection afford to an individual is ultimately the protection of anonymity in a crowd.

If you can speak up and against an authority, then fade in to a crowd, then you are safe. Individually we are no match for the arbitrary power exercised by those who pretend to rule. however, together, they fear us.

What this metadata does, in the first time in time in-memorial, is to remove this anonymity forever both from digitial and physical world.

Every individual in a crowd, be it digital or physical, will be identified and recognized. identity tracked, movement analyzed, at an instant the individuals that made up of the crowd, their entire personal history at the finger tips of the trackers.

Thus one can not put on a guy fawk mask and together walking down the street anymore. because there is no point for the mask. they already know who we are.

What we have today is the slow motion death of the world as we know it.

I relate that increasingly the world foretold in bible prophecy is coming into reality. The Tribulation is presented in bible prophecy as mankind’s last seven years, where the Sovereign, Revelation 13:5-10, secures a Middle East Peace Plan and moves out of Europe to establish his world wide headquarters in Jerusalem, Daniel 9:25.

Christ’s final dispensation, that is Christ’s final economy, Ephesians, 1:10, will be the age of the global security state, that is the time of a one world government, which provides seigniorage, that is moneyness, through the charagma, that is the mark of the beast, which is designed for both emperor worship, as well as for payment processing of all commercial trade, though the 666 credit and money system, Revelation 13:18. This Great Tribulation is the last 3 and 1/2 years, where a small number of God’s elect are driven into a refuge, that is a sanctuary, in a wilderness place, where no drone can go, nor any missile penetrate, to live by what ever means Gods provides for 42 months, Revelaiton 12:6, while the rest of humanity is called by the Seignior, that is the Sovereign’s banking partner, to Emperor worship, Revelation 13:11-17, where one will be commanded to worship-on-demand, through communication devices, such as one’s phone, which present holographic projections of and direct communication from the world’s king. The Gateway Pundit reports AT&T to load iPhones with alerts from Obama, that you can’t switch off.

It is the metadata, that provides not only one’s location, but also one’s context, relationships, and innermost identity, living in one’s soul, to be made known to the Sovereign and to the Seignior, enabling a genuine experience of conformity with, and worship to, the King and his Banker. It is the metadata that secures the trust of an individual.

Wearable authentication and wearable security is now being developed which can be used for payment of goods and or services; with such, one would become branded property of the state. DigitalTrusting reports Motorola has revealed plans for hi-tech authentication systems that could make accessing data faster and easier, including a “tattoo” with embedded sensors and antenna, and an “authentication pill” which turns the human body into a giant authentication token. Both are designed to replace current systems such as typing in four-digit codes on screen on smartphones. Regina Dugan, who leads special projects for the Google-owned company, showed off a tattoo, made by company MC10, on her own arm at D11, the All Things Digital conference. Motorola said it planned to work with the company on authentication systems for future smartphones, according to AllThingsD. Dugan previously worked for DARPA. “Authentication is so annoying that only about half the people do it,” says Dugan. “Despite the fact that it is a lot of data on your smartphone that makes you far more prone to identity theft. We are thinking about a whole variety of things to make that better. “ Dugan also showed off a pill, which is powered by a chemical reaction with stomach acid, and produces a machine-readable 18-bit signal which can be used for authentication. “I take a vitamin every day, why can’t I take a vitamin authentication every day?” asked Dugan.”Your entire body becomes an authentication token. It becomes your first superpower. When I touch my phone, my computer, my door, my car I am authenticated.” Slate magazine’s video shows off the size of the pill. “This isn’t stuff that is going to ship anytime soon, but we have demoed it working. We are trying to think big again,” said Motorola CEO Dennis Woodside. The post Motorola predicts passwords could be replaced by arm tattoos and “authentication pills” appeared first on We Live Security.

5) … News of Afghan Exit

Sharmine Narwani is a commentary writer and political analyst covering the Middle East, and a Senior Associate at St. Antony’s College, Oxford University. And Wikipedia relates that St Antony’s College is one of the constituent colleges of the University of Oxford in England. Founded in 1950 as the result of the gift of French merchant Antonin Besse of Aden, St Antony’s is the most cosmopolitan of the seven all-graduate colleges of the University of Oxford and is widely considered to be a centre of excellence for study and research in the fields of international relations, economics, politics, and area studies.[1] The college’s areas of specialist study include Europe, Russia and the former Soviet states, Latin America, the Middle East, Africa, Japan, China, and South and South East Asia.

Sharmine Narwani posts the same article in Beirut-based Al-Akhbar which writes with the highest standards of journalistic integrity while remaining true to the principles of anti-imperialist struggle, progressive politics, and freedom of expression.

6) … Summary … With the “extinction event” of a fast rise in the Interest Rate on the US Ten Year Note, liberalism’s dynamo is powering down, and authoritarianism’s dynamo is powering up …. Yet the elect are continually enlivined by Christ. Dr Worden provides A concise history of Liberslism’s Banker Regime. In 1913, exactly a century before the Federal Reserve’s board wrestled with whether to reduce the central bank’s bond-buying program, a fiscal stimulus to reduce unemployment, the bill establishing the central bank became law. At the time, it was assumed that the gold standard would provide sufficient constraint. This assumption would go flat in 1973 with Nixon’s termination of the Bretton Woods agreement. By 2013, the premise of the Act, which specifies three purposes for the Fed: “to furnish ‘an elastic currency,’ to provide a market for commercial paper so that banks would have more liquidity, and to improve supervision of banks,” had been superseded to a degree that would have stunned even the advocates of the original bill. a consolidating trend favoring both big business and the U.S. Government at the expense of the states can be discerned from legislation passed in 1913. The consolidation of banking power in a few megabanks like Citigroup and JPMorgan and of political power in the U.S. Government evident in 2013 can thus be viewed as having historical underpinnings.

Please consider the Dispensation Economist Manifest which explains that inasmuch as the US Federal Reserve, and the other world central bankers have crossed the Rubicon of sound monetary policies via interventionism of Quantitative Easing, POMO, Global ZIRP and Kuroda Abenomics, “money good” investments have failed, on the death of fiat money; and thus the mass extinction of investors has commenced.

Jesus Christ, operating in the economic plan of God for completeness of every age, epoch, era, and time period, Ephesians 1:10, has completed Liberalism’s moral hazard based age of investment choice via the “extinction event” of the sharp rise in the Interest Rate on the US Ten Year Note, ^TNX, to 2.01% on May 24, 2013, and then to 2.51% on June 21, 2013.

Now, Christ is introducing Authoritarianism’s Beast Regime and the age of diktat, featuring regional governance, totalitarian collectivism, and debt servitude, where people will increasingly trust in the diktat of regional nannycrats for regional security, stability, and sustainability, as presented in Revelation 13:1-4.

Under Liberalism, the Interest Rate on the US Treasury Note, ^TNX, sustained economic and political life. Now under Authoritarianism, diktat sustains life. Liberalism’s element of financial life, that being credit, has perished. With Liberalism’s financial life element of credit dead, Authoritarianism’s economic and political life element of diktat is rising to rule mankind.

Liberalism’s Banker regime (based upon democratic nation states) had a policy of investment choice. The dynamo was one monetary interventionism, consisting of POMO, Quantitative Easing, Central Bank Interest Rate Reductions, Kuroda Abenomics, and Global ZIRP, which powered up corporate profit and global growth … and came with credit schemes, such as free trade agreements, financial deregulation, leveraged buyouts, nation investment, currency carry trade investing, securitization of debt, financialization of stocks and ETFs, and dollarization … where Milton Friedman established the rule underlying all investing, providing for the fiat money system.

Authoritarianism’s Beast regime (based upon statist regional governance) has a policy of diktat. The dynamo is one totalitarian collectivism consisting of public private partnerships for oversight of the factors of production, banking, commerce and trade, which powers up regional security, stability and sustainability … and comes with debt servitude schemes, such as regional framework agreements, bank deposits bailins, new taxes, privatizations, capital controls, and austerity measures … where Nannycrats establish the rule underlying all diktat, providing for the diktat money system.

The fiat know and experience Authoritarianism’s life element, that being diktat. In contrast, the elect know and experience God’s life element, that being Christ. Even though the Beast Regime, Revelation 13:1-4, is growing ever stronger, Christ the element of life, Colossians 3:1-4, acts as God’s dynamo, enlivening those of the like precious faith of Jesus Christ, 2 Peter 1:1; whereas all others live by diktat.

Pastor Chris Oyakhilome writes of God’ dynamo. But ye shall receive power, after that the Holy Ghost is come upon you: and ye shall be witnesses unto me both in Jerusalem, and in all Judaea, and in Samaria, and unto the uttermost part of the earth.” (Acts 1:8) Jesus said you shall receive power after that the Holy Ghost is come upon you. In the Greek rendering, the word translated ‘power’ is DUNAMIS. So what Jesus actually said was “And you shall receive DUNAMIS after that the Holy Ghost is come upon you.” What is dunamis? It’s a special kind of power. It’s inherent power that functions like a dynamo. The word ‘dynamo’ comes from the Greek word ‘dunamis;’ that’s where the English word ‘dynamite,’ a powerful explosive, is derived from as well. Knowing how a dynamo functions will help us understand what dunamis is. That will in turn tell us what Jesus meant when He said, “Ye shall receive dunamis.” A dynamo is a special kind of machine. You get it started, mechanically, either by turning a knob or pushing a button. When it starts, it produces electrical power and then converts some of that electrical power back into mechanical power to cause the machine to go on and produce more electrical power. It doesn’t need help from anywhere; it’s a self-converter! It has in-built ability to convert mechanical power to electrical power and vice-versa. It just keeps going on without any external help. So when Jesus said, “You shall receive dunamis,” He meant, “You shall receive INHERENT POWER that functions like a dynamo!” That’s what you got when you received the Holy Ghost. You received the inherent dynamic ability to cause changes. That power is independent of any other power; it doesn’t need help from God, man or angels. After receiving the Holy Ghost and all through His three years of earthly ministry, the Lord Jesus never once had to pray and ask God for more power. He functioned in this inherent power. That power is not coming from above anymore; it resides in you today. You may have been told that you were born a sickler; it doesn’t make any difference now, because you can change it! You may have a husband who’s sick with stroke; it doesn’t make any difference anymore. Maybe you were born with a deformed heart, it doesn’t matter anymore. Now that you’re born again and you have the Holy Spirit in you, you can exercise dominion over these things as you activate that power within you.